The Role of Health Capital Stock to Economic Growth In Sub-Saharan Africa: A Dynamic Panel Data Approach
No Thumbnail Available
Date
2010-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa University
Abstract
There are considerable differences in income per capita and output per worker across
countries of the world. The original Neo- classical growth model was not able to explain
such income differences. Most of the works aimed at augmenting this model by including
human capital focus on education only. Little has been done in modeling stock of health
capital as a determinant of economic growth and so far empirical evidences of this area
are not able to come up with conclusive results regarding the health-wealth nexus. Some
evidences support the view that ‘health is wealth’ while others contradict this and argue
in support of the negative relationship; and we see some countries with better
growth/development but with unfavorable health indicators and vice versa that makes
the relationship less clear and calls for further research. Methodological shortcomings
are mostly viewed as an important reason for inconsistent and inconclusive results in
addressing the problem. Solving the endogeneity of health is the notable problem in this
respect.
In this study, therefore, we tried to explicitly model the role of health human capital in
economic growth of sub-Saharan African countries in which we included both health and
education variables to augment the Neo-classical growth model. We used two data
sources, the World Development Indicators 2008-09(WDI) and the Penn World Table
(PWT) Version 6.3, to construct alternative panel datasets. Our dynamic panel data
model was estimated by using the System and Difference Generalized Methods of
Momentum (system GMM and difference GMM) that account the endogeneity of health
and other regressors. The result reveals that health human capital (proxied by life
expectancy at birth and infant mortality rate) positively and significantly affects
economic growth of sub-Saharan Africa while the effect of education was found to be
positive but insignificant. This finding has a policy implication that investing in health
and improving health conditions helps countries accelerate their economic growth and
reduce the existing poverty.
Description
Keywords
Economic Policy Analysis