Introduction: Any rise in health expenditure is the main concern of householders and policymakers. A few studies have been conducted on assessing the determinants of expenditures and environmental quality from a macroeconomic point of view. This paper aimed to investigate the relationship between health expenditure and environmental quality in more than 114 developing countries between 1995 and 2007.

Methods: In this study, health expenditure was proxied by the total per capita health expenditure data of WHO. In addition to per capita Gross Domestic Product (GDP), environmental quality, per capita carbon dioxide emission, Energy Intensity, access to clean water and improved sanitation were used as the determinants of health expenditure. The long-run equilibrium of the variables as well as health expenditure and environmental quality were studied by panel co-integration tests. The long-run and short-run elasticities were estimated by Dynamic OLS and Error Correction Model techniques.

Results: According to the results, income was the most important determinant of health expenditure in different countries. The elasticity of health expenditure with respect to GDP was more than one. Although in the short-run the energy intensity did not affect health expenditure, in the long-run, there was a positive relationship between these two variables.

Discussion: Income and environmental quality are important determinants of per capita health expenditure. There is a direct connection between health expenditure and environmental quality, in both long and short-run, suggesting that the deterioration of environmental ecosystems – as an unpleasant bi-product of production – leads to health problems.