Health, labour productivity and growth

2003

We construct an endogenous growth model based on Lucas (1988) and van Zon and Muysken (2001). The model shows how the provision of health services influences an economy's rate of growth. Since growth is produced using labour services, increasing health activities also implies lowering output and possibly growth. At the same time a good health is necessary to be productive at all. Hence there is a direct trade-off between the health state of the population and growth performance. We add a stylized demographical and epidemiological module to the Lucas model that enables us to distinguish between care activities and cure activities. We illustrate how changes in the rate of morbidity and the rate of mortality influence the optimum allocation of scarce (labour-) resources over its various uses that include care-, cure-, final output production and human capital accumulation activities. We show that in this setting the relation between growth performance and health activities is parabolic. For low levels of health activities growth increases with the size of the health sector, and then starts falling again for further increases in the size of the health sector. Thus we illustrate that an increase in longevity as experienced by Western economies entails lower growth prospects for these economies, while for economies in the development stage, a positive relation between health activities and growth is more likely to exist. For the latter countries a double health dividend may be realized from increasing health care spending, i.e. the population can attain both a higher health level and a higher growth rate of income and consumption per head. For Western economies such a double dividend might still be obtained by increasing the productivity of the health sector rather than by expanding health activities, ceteris paribus. The main conclusion of our model is, however, that human capital accumulation is still the ultimate source of growth, but the health sector is instrumental in realizing the potential of the productive human capital embodied in the population. Because of that, an exclusive focus on cutting current health costs may interfere with the growth prospects of an economy, thus potentially tightening intertemporal macro economic budget constraints rather than loosening them.

We construct an endogenous growth model based on and .

Quality & Quantity, 2015

This paper uses time series data for seven industrialized countries from 1980-2009 to explore the causality between health care expenditure (HCE) and economic growth. We have set up a classical Cobb-Douglas production function including HCE, labor, capital, and an augmented function additionally including the number of patent applications (as a proxy for technology and research) and the total number of tertiary education students (as a proxy for education). Our results show that there is a long-run relationship between growth and HCE. As regards causality, in the classical production function, evidence for mutual causality between GDP and HCE is noted only in France, Germany and England, causality from HCE to GDP is noted in Italy and Japan, while no causality whatsoever is evidenced in Canada and USA. However, a completely different situation is unveiled when the augmented production function is used with mutual causality being noted in all perused variables. The novelty of our study lies first in that it contributes to the health-growth nexus literature for high-income countries which has been quite controversial and second it sets off new variables whose omission might be one of the reasons of the result dichotomy. Results of this study will be very useful for high-income countries currently afflicted by the economic crisis and embark on HCE curtailments or revisions.

The thematic thrust of this paper examines health as a fundamental determinant of economic growth and development. The paper focuses its discourse mainly on the economies of countries with medium and low human development (henceforth referred to as Developing Countries -DVCs ). Health will be discussed at the macroeconomics level as public health. Health is a causative factor not only of individual income, education and demographic trends, but also of a country's aggregate level of economic growth. Since development is a consequence of good health, even the poorest developing countries should make it a priority to invest in their health sector. Unfortunately, health has been poorly invested upon by countries with low human development, and the health sector still remains largely untapped and continues to suffer neglect. This has further slowed down the industrialization of DVCs. In order to give this paper a structural approach I will be looking at a number of mechanisms through which health can be an instrument to generate economic productivity and national well-being. The mechanisms are:

2005

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2006

Journal of Health Economics, 2001

The focus of endogenous growth theory on human capital formation and the physical embodiment of knowledge in people, suggests the integration of the growth supporting character of health production and the growth generating services of human capital accumulation in an endogenous growth framework. We show that a slow down in growth may be explained by a preference for health that is positively influenced by a growing income per head, or by an ageing population. Growth may virtually disappear for countries with high rates of decay of health, low productivity of the health-sector, or high rates of discount.

Applied Economics, 2021

This paper studies the empirical relationship between a country's health and its GDP dynamics in low-and middle-income countries. We employ a semi-parametric technique, which combines mixed panel data models and cluster analysis to account for unobserved heterogeneity, which is an important source of estimation bias in growth regressions. We estimate a version of Mankiw, Romer and Weil (1992) augmented with human capital, in the form of both education and health. Our estimates show that population's health, here proxied by the life expectancy at birth, has a positive, sizable, and statistically significant effect on both the level and the growth rate of the real per capita GDP.

2001

Macroeconomists acknowledge the contribution of human capital to economic growth, but their empirical studies define human capital solely in terms of schooling. In this paper, we extend production function models of economic growth to account for two additional variables that microeconomists have identified as fundamental components of human capital: work experience and health. Our main result is that good health has a positive, sizable, and statistically significant effect on aggregate output. We find little variation across countries in average work experience, thus differentials in work experience account for little variation in rates of economic growth. Finally, we find that the effects of average schooling on national output are consistent with microeconomic estimates of the effects of individual schooling on earnings, suggesting that education creates no discernible externalities.

2016

This paper reviewed extensive theoretical and empirical studies which emphasize the role human capital in form of health, in economic growth. Most of the studies used proxies like life expectancy, infant mortality rate and health expenditure to estimate the effects of health on economic growth. Majority of the studies agree the positive impact of health on the economic growth and suggest investment in health to achieve sustained economic growth.