Does the Improved Health Can Raise GDP? (A Longitudinal Study of Pakistan Economy)Airlines
Khan R, Salim H and Laila A
Published on: 2019-12-28
Abstract
Objective: The prime objective of this research work is to identify impact of Human Health Capital on Nation’s economy (GDP) to get the weak points or effected points and explore how health and its variable effect on GDP Growth.
Data and Methods: A descriptive and detail study consists of 57 periodical observations of time series data to determine the effect of Health indicators (like Health Expenditure, Age Dependency, Mortality rate of Adults and child, Health awareness and education) on GDP. In this study we used health expenditure for deterring of major health input variable. The independent variable of the model was Per capita GDP and also was proxy for GDP growth. The data were tooked from 1961 to 2018 on yearly basis form secondary sources such as State Bank of Pakistan, Pakistan Statistics Bureau, World Bank and WHO.
Results: The model was ninety six (96%) percent complete (r²= 0.96 while adjusted R-squared is 0.95), and variables were relevant. The dependent variable was GDP while the method was for analysis least square (Regression Equitation). Results shows that health indicator health human capital (physical) play significant role while some variable does not have result oriented relation economic growth. In short they affect only in long term relationship.
Conclusion: Results shows that country like Pakistan which require high & optimize level of income ratio per capita, they can achieve the his target only by improving efforts and increasing the stock of human health capital (physical), particularly when the financial status is at the bottom. Furthermore, the results indicate that public health expenditure, life expectancy and secondary enrolment did not effect on GDP and GDP growth.
Keywords
GDP growth; Health; Health human capital; Human physical and education capitalIntroduction
As in current 21st era, every country is working harder towards his mass goal to improve his economy and retain its reservoir on currency and gold. The human health works as an asset, if the nation’s health is improved then the nation will be productive and grow faster and furthermore its health burden & health cost will be smaller. Like many other countries, in the era of industrialization and development, one of the most core objective of macroeconomic policies in Pakistan is to achieve and sustain high economic growth, to get her by improving “Health Human Capital”(physical and educational). Health plays a very important role in improving& enhancing economic growth. However, it has been observed that it is time dependent. There is serious debate in that whether the relationship between health and GDP growth is time bound or not. In this study, we have reviewed several research theories and paper on health variables & its impact on GDP growth rate, and to find the impact of health on economic growth & their relationship. The paper also reviews recent empirical literature [1-3]. This includes studies done by others universities, WHO and SBP (State Bank of Pakistan). Ultimately, we tested whether a meaningful relationship held in Pakistan between health and GDP, and whether the relationship between health and its variable is negative or positive. In this paper we study the Health, acting as the solution in determining human capital. Improved health, improved economic growth, as the affectivity and productivity from labor force, all of which in the long run contributes to economic growth and leads to human welfare. To accomplish better, additional skillful, efficacious and productive human capital resources, government subsidizes the health care facilities for its people. In this regard, the public sector pays whole or some part in cost of utilizing healthcare services. The size and distribution forms in-kind transfers to health sector differ from country to country but the fundamental problem is how to a great extent these expenditures are productive and outcome yielding. That much depends on the volume and distribution expenditure among the people of different areas from country. Besides the nature of existing circumstances from human resource, whichever marginal change in public sector spending on health facilities, they all have positive impact on the human capital and economic growth. The Human capital acting as fundamental responsibility for sustainable economic growth. At the same time unusual “Growth Theories” suggest the responsibility of human capital as an important growth method. The concept of human capital during economic journalism gets distinct generally by counting education, health, and immigration, and other investments that augment an individual productivity. However, the growth economists that have included human capital during the development studies, paid better concentration on analyzing the impact of education on economic growth, while ignoring the role of health in human capital. This is only during very recent times that study encompasses started looking at health and tried to estimate the relationship connecting health status in addition to economic growth. A general idea and a stopover from 66-year mission from health system inside Pakistan made available proof of both attempt efforts in addition to impediments. Programs expected by the organization to promote health must have to be viewed as a developmental requirement and consequently, careworn policy with financial maintenance from general plans for improvement with growing allocation in current years. On the other hand a gap in the accomplishment of policy and the deficiency in inter-social advancement to health have excluded this objective from completely translating interest in desired outcome. Some governments have attempted to allow the direct freedom of services burden, and subsidized healthcare delivery for all. This commitment is evidenced by the existence of an extensive infrastructure, one from the majority elaborate primary healthcare systems in the world. These facilities remain inundated with many challenges which raise questions about the validity of investments made in them. Advancement has also been achieved in many public health domains; however, the implementation from program remains hostage to too many overarching social service delivery, governance and management issues, and boundary challenges. Furthermore, several policies and legislative as well as authoritarian frameworks remain poorly implemented due to generic issues inherent to the implementation of laws. Moreover, the country’s focus on producing more doctors has led to marked improvements in the doctor-to-inhabitants. Relative financial resources conversely challenges quality, capacity and the effective and equitable deployment of health related human reserve, which still looms at large. These issues are further exacerbated by poor regulation from private sector, surrounded by an array of challenges [4].
Materials And Methodology
Many health variables can be used to find relationship between Health and Economic growth. We can divide them into two type health indicators. One is Health input variables while the other is health output variables.
- Health input variables are composed of Health expenditure (HE), population (hospitals) per bed, and quality of healthcare services.
- Health output variables are comprised of life expectancy, adult survival rate, infant mortality rate and infertility rate.
In this study we take 57 observations of time series data to determine the effect of Health indicators on GDP. In this study we used health expenditure for deterring of major health input variable. The independent variable of the model was Per capita GDP and also was proxy for GDP growth. There are some other variables also used. Details of variables are mentioned in (Table 1). We took the data from 1961 to 2018 on yearly basis form secondary sources such as State Bank of Pakistan, Pakistan Statistics Bureau, World Bank and WHO (Figure 1) [5-6].
Figure 1: GDP Growth.
Table 1: Mortality rate (MI) and age dependency (AE) indicate that if the MI and AE will increase the GDP growth.
Sr. No. |
Variables |
Data Source |
Representation |
1 |
Per Capita GDP |
WDI 2012 |
GDP |
2 |
Age Dependency |
WDI 2012 |
AD |
3 |
Openness (Trade % of GDP) |
WDI 2012 |
Trade |
4 |
Life Expectancy |
WDI 2012 |
LE |
5 |
Infant Mortality Rate |
WDI 2012 |
MI |
7 |
Secondary Enrolment |
SBP Annual Reports |
SE |
8 |
Health Expenditure % of GDP |
SBP Annual Reports |
HE |
9. |
Population per Bed |
SBP Annual Reports |
P |
10 |
Primary Enrollment |
SBP Annual Reports |
PE |
Theoretical Model
The prime focus of research is to analyze the effect and relation of health human capital (HC)with economic growth (GDP), there for human capital is divided in two separate parts primarily, human health capital (HC) and human physical capital for example human educational capital (HEd). Income per Capita(Y) was considered as a function of stocks of Human physical capital (K), human health capital (HC), human educational capital (HEd) and compound of some other variables (Ze) which included with technological and some environmental variables. Y = f (HC, HEd, K, Ze) Where Y represents per capita GDP, HEd is Human Educational capital HC is health human capital, and Ze represents all other remaining descriptive variables. The equation of per capita output was analysed and the constructed observed model can be expressed in the below mentioned equation as; Per capita GDP t =α + β Age Dependency + β? Health Expenditure + β? Openness (Trade) + β? Population per bed + β? Life Expectancy + β? Mortality Rate + β? Secondary Enrolment +β? Primary Enrolment + ? (Error Terms).
Results
To find the relationship between variables of Health and Economic Growth, regression technique and least square method is used. We get the following results: The model was ninety six (96%) percent complete (r²= 0.96 while adjusted R-squared is 0.95), and variables were relevant. The dependent variable was GDP while the method was for analysis least square (Regression Equitation). A 57 observations were taken from the period of 1961 to 2018. Results analyzed from regression model with least square method shows that health indicator health human capital (physical) play significant role while some variable does not have result oriented relation economic growth. In short they affect only in long term relationship [7]. This suggest and implies that impact and relation of health is long run phenomenon only and it’s there is not an measureable relation in the short run with health variables and GDP growth. The study also suggest that country like Pakistan, which desires higher level of per capita income, they can be achieve the target only by increasing efforts and improvement in human health capital (physical) stock, particularly when the financial times are at bottom (Table 2). Further that the study indicates that a public health expenditure, life expectancy and secondary enrolment did not effect on GDP and GDP growth (Figure 2). The negative sign on Mortality rate (MI) and age dependency (AE) indicate that if the MI and AE will increase the GDP growth will be decreased which mean they are inversely proportion to GDP growth [8-10].
Figure 2: Relation of GDP and variables.
Table 2: The negative sign on Mortality rate (MI) and age dependency (AE) indicate that if the MI and AE will increase the GDP growth.
Variable |
Coefficient |
Std, Error |
t-Stats |
Prob |
C |
3729.337 |
426.1084 |
8.752086 |
0.0000 |
Trade |
5.547043 |
1.997903 |
2.776433 |
0.0081 |
PE |
-3.639341 |
1.306682 |
-2.78517 |
0.0079 |
MI |
-5.419128 |
0.956817 |
-5.66370 |
0.0000 |
AE |
-32.78724 |
5.641390 |
-5.81190 |
0.0000 |
SE |
1.383219 |
1.653998 |
0.836288 |
0.4076 |
P |
23.68487 |
33.40502 |
0.709021 |
0.4821 |
HE |
-1.404106 |
3.129797 |
-0.44862 |
0.6560 |
LE |
-1.292870 |
1.947803 |
-0.66375 |
0.5104 |
Conclusion
The central idea and results suggested that country like Pakistan which require high & optimize level of income ratio per capita, they can achieve the goal i.e. improved GDP by improving health and education status & by improving efforts and increasing the stock of human health capital (physical), particularly when the financial status is at the bottom. Furthermore, the results indicate that public health expenditure, life expectancy and secondary enrolment did not effect on GDP and GDP growth. The negative sign on Mortality rate (MI) and age dependency (AE) indicate that if the MI and AE increase the GDP growth will be decrease, which means they are inversely proportional to GDP growth.
Recommendations
From a research point of view, the results imply that the human health capital (HC) should be included and considered in the GDP equation of Pakistan economy, because it has very significant role and vital component of human capital and asset. Furthermore there are huge requirement for further studies, which would analyze the effect of health demand (HD) in Pakistan. As such study is missing for many years. Similarly, there is also dire need for a comparative research study to investigate the role of public and private healthcare center son improving Health. There is also need to analyze the role of education in improving health and GDP growth. We also recommend that there is need to analyze the role of NGOs, Govt. health services in improving health human capital.
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