Health Indices and Nigeria Economic Growth
Chapter One
OBJECTIVES OF THE STUDY
This focus of this research work is to examine the type of correlation that exists between health indices and economic growth.
Specifically, the study intends:
To determine how infant mortality affects economic growth.
To determine how life expectancy affects economic growth.
CHAPTER TWO
LITERATURE REVEIW
Introduction
Health is a very important, germane and vital human capital input necessary for the attainment of economic growth and development as it deals with almost all aspects of the human life be it physical, mental, social or economical, therefore its role in achieving a sustainable growth and development cannot be overlooked. Human capital in the past has been viewed as being made up of education until recently where various works, nations and institutions tend to focus on the subject matter of health. Health has become a global issue as it deals with the welfare and productivity of individuals thereby attracting attention as can be seen in the Millennium Development Goals (MDGs) adopted by 189 countries following the signing of the United Nations Millennium Declaration in 2000 where out of 8, MDG 4, 5 and 6 where directly related to health. The Sub-Saharan Africa region due to the high prevalence of illness has attracted the highest attention so as to attain these goals but despite these efforts made towards attaining these goals, it has been observed that relative to other regions this region has shown the slowest response and has limited the level of progress. This chapter seeks to look into the definitional/conceptual issues, the theoretical issues and the empirical/methodological issues on the role of health on economic growth in Sub-Saharan Africa.
Review of Definitional/Conceptual Issues
Health and Economic Growth
The relationship between health and economic growth is one that has drawn the interest of various researchers, institutions and nations as health being a very important human capital input is also a determinant of economic growth and development. A main feature of this relationship is the two way causation between health and the economy as better heath encourages economic growth through an increase in productivity as a healthy workforce is more efficient and also economic growth can also encourage more accumulation of health capital (Barro, 2013). In examining some works focusing on the relationship between health and economic growth, there tend to be a general consensus on a positive relationship as this can be seen in the works of Baker (1998), Weil (2006), Canning (2005), Rico et al. (2005) and others. Despite the number of works done here, there have been some challenges. One of the challenges is that of measurement as most of the empirical studies on the impact of health on economic growth use life expectancy as a proxy variable of health and this has some limitations as it does not cover all dimensions or aspect of health since it only accounts for mortality while morbidity, disability and comfort are ignored and these are what affect the welfare and development of a nation. According to Rico et al. (2005) this becomes a problem despite the reliable link between health, productivity and economic growth and that looking at the Grossman’s model in (1972) in which human capital depreciates overtime, the use of life expectancy as the only indicator stops this relationship from being binding since it only takes into account the lifetime of the stock of human capital with less regards for the quality of this human capital stock or labour force timing. In correcting this measurement problem, he extended the dimension of health using the four determinants as defined by the European commission of public health which includes health services, socio-economic conditions, lifestyles and environment. Also, the challenge of endogenous causality that exist between health and income as according to Luft (1978); Rico et al. (2005) in an official way of explaining causality said that “a lot of people who otherwise wouldn’t be poor are, simply because they are sick; however, few people who otherwise would be healthy are sick because they are poor ”. A way of solving this problem is by the use of instrumental variables such as the percentage of land between the tropics or the distance from the equator as in Hamondi and Sachs (1999). According to Bloom et al. (2001) the instrumental variables technique must satisfy two criteria; it must be correlated with the endogenous independent variables, i.e. variables that suffer from reverse causation and it must be uncorrelated with the error term, conditional on the instrumental variable’s correlation with every other specified independent variable on the right hand side of the equation.
Human Capital and Economic Development
Human capital refers to those human capacities that aid or is required to enhance productivity and economic development. Human capital majorly consists of health and education and these are vital inputs to the aggregate production function and are essential components of growth and development. The role of human capital as a major catalyst for long term growth and development as universally regarded cannot be overemphasized; therefore proper consideration should be given to the human capital inputs if sustainable growth and development is to be actualised. Poor countries or developing countries find great difficulty in competing with highly developed countries due to their low human capital stock and if this is to be actualised, there must be an increase in the human capital stock towards the direction of these developed countries. The study of human capital has been attributed or directed to schooling (education) factor until recently where studies now tend to direct or focus on health as a variable of interest and an important human capital input. Some researchers such as Gallego (2000) have explained this neglect of health as a result of the lack of combination or integration between health economics and economic growth (Rico et al., 2005).
CHAPTER THREE
Methodology and Data
Theoretical Framework
This study employs Schumpeterian theory of growth to model the influence of health on economic theory adopted from Howitt, 2005. Schumpeterian theory is an endogenous growth theory that attributed differences in growth rate between rich and poor countries to the rate of productivity growth and not rate of factors accumulation. The theory distinguished explicitly between physical and intellectual capital and also between saving, that causes growth in physical capital, and innovation, that causes growth in intellectual capital, which the first generation of endogenous growth theories lump together. It is based on the assumed creative destruction by arguing that new innovation leads to competitive edge by rendering obsolete previous innovation. It also considers the role of technology transfer- international diffusion of technology, a technology spill over a country enjoy from other country’s innovation. This theory implied that a country that is at the lower rand of technology ladder can take advantage of the innovation that is been created already in other country. The theory differs from neoclassical theory by assuming that technological progress is endogenous. Unlike the neoclassical growth theory of Solow, the endogenous growth predicts growth rate determines by the global technological progress. The advantage of Schumpeterian theory over the neoclassical is that it attributed differences in growth rate between rich and poor countries to the rate of productivity growth and not rate of factors accumulation. Investment in research and development is significant to this end. Health is treated as a component of human capital and by this it contributes and predicts relative productivity and per capita GDP through productivity efficiency, skill accumulation, research efficiency and intensity, learning efficiency, school enrolment and savings.
CHAPTER FOUR
RESULTS AND FINDINGS
Results Of ADF Test
The study employs the ADF (Augmented Dickey and Fuller methodology). The null of a unit root is investigated against the alternative of a stationary process for all the series.
Table 1 shows the results of the ADF unit root tests. The level models and difference models have been specified with constant and time trends in the data generating process. The table shows that more or less, a unit root is detected for the level variables, while the first differences appear to be stationary. Mixed results in relation to the order of integration are obtained. The inclusion of a time trend seems to affect the outcome. However, most of the series are found to be I(1). Overall, based on these observations, the series appear to follow an I(1) process.
CHAPTER FIVE
SUMMARY AND CONCLUSIONS
SUMMARY
In order to adequately comprehend and understand this topic, the research work was proficiently divided in to five chapters. In the first chapter, a general overview and background of the study was examined including the statement of the research problem, the research objectives, hypothesis among others. Also, a thorough review of existing literature on the role of health on economic growth in Sub-Saharan Africa and this consisted of the conceptual, theoretical and empirical issues. In chapter three, the theoretical foundation of this work which is the Schumpeterian theory of growth.Schumpeterian theory is an endogenous growth theory that attributed differences in growth rate between rich and poor countries to the rate of productivity growth and not rate of factors accumulation. The theory distinguished explicitly between physical and intellectual capital and also between saving, that causes growth in physical capital, and innovation, that causes growth in intellectual capital, which the first generation of endogenous growth theories lump together. The fourth chapter consist of the data analysis and presentation in which both the descriptive and econometric analysis was conducted. The summary of findings, economic interpretation of results and policy implications were examined. Lastly, the fifth chapter provides a conclusion to the study.
CONCLUSION
This study has revealed that there is a cointegrating relationship among GDP, gross capital formation and other measures of health status. The results further show that per capita GDP Granger cause gross capital formation and measures of human capital and vise versa, implying that a bi-directional relationship exists. The role and importance of per capital gross domestic product in human capital development cannot be overemphasized as a mechanism for effective allocation of fund to the health sector and ensure sustainable health status. Thus, this study investigated the long-run economic relationship between health and gross domestic product in Nigeria.
Using a time series data of five variables followed over 42 years, we have studied the stationarity and cointegration properties of health expenditure and GDP, life expectancy, infant mortality, and gross capita formation, ultimately measuring the long term impact of the identified exogenous variable on GDP. The Cointegration result confirms that health variable plays a very significant role in determining the long run economic growth. As all the health indicators have a significant impact on the long run economic growth. Our analysis indicates that GDP and most of its determinants are non-stationary, and that they are linked in the long-run.
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