Investigating Interactions among Health Care Indicators, Income Inequality and Economic Growth: A Case Study of Iran

Document Type : Research Article

Authors

1 Assistant Professor of Economic, Department of Economics, Faculty of Economics & Social Science, Bu-Ali Sian University, Hamedan, Iran

2 Associate Professor of Economic, Department of Economics, Faculty of Economics & Social Science, Bu-Ali Sian University, Hamedan, Iran

3 M.A. in Economics, Department of Economics, Faculty of Economics & Social Science, Bu-Ali Sian University, Hamedan, Iran

Abstract

Life expectancy and infant mortality are two major indicators for assessing the efficiency of every social health system. The bulk of literature on health economics is related to unilateral influences of macroeconomic variables on health sector indices and less attention has been paid to bilateral and simultaneous effects. Therefore, this paper aims to examine the bilateral and simultaneous impacts of the key macroeconomic variables on life expectancy and infant mortality in Iran during 1981-2018. To this end, by considering the government’s health care expenditures and GINI coefficient, a system of simultaneous equations based on variables of life expectancy, infant mortality and economic growth is developed. The findings indicated that income growth per capita affects the growth of life expectancy index positively by 31%, but the growth of social-class differences or income inequality has a negative effect on this index. Moreover, the escalation of health care budget in Iran has led to slumps in infant mortality rate by 83%. Such outcome exhibits the significant role of government, parliament and legislature in approving and improving the budget of the Ministry of Health and facilitating achievement of higher social-health standards. Finally, findings of present study reflected the simultaneous and positive effects of improving growth of life expectancy and reverse effect of infant mortality growth indices on the economic growth of Iran. The estimations provided evidence on the interactions between enhancing the macroeconomic conditions and improving the health economy indicators and existence of a reinforcing loop between them.

Keywords

Main Subjects


Abdallah, A. (2014). “Implementing Quality Initiatives in Healthcare Organizations: Drivers and Challenges.” International Journal of Health Care Quality Assurance, Vol.27, Issue 3.
Ablo, E. & Reinikka, R, (1998). “Do Budgets Really Matter? Evidence from Public Spending on Education and Health in Uganda”, Policy Research Working Paper 1926. Development Economics Research Group. World Bank, Washington, D.C.
Acemoglu, D. & Johnson, S., (2007). “Disease and Development: The Effect of Life Expectancy on Economic Growth”, Journal of Political Economy, Vol.115, No.6.
Aghion, P, Caroli. E. & García-Peñalosa, C., (1999). “Inequality and Economic Growth: The Perspective of the New Growth Theories”. J EconLit, 37(4):1615-1660.
Amartya, Sen., (1993). “Capability and Well-Being,” In: The Quality of Life, Ed. Martha Nussbaum And Amartya Sen (Oxford, UK: Clarendon Press), 30-53.
Asteriou, D. & Hall, S, (2007). Applied Econometrics: A Modern Approach. Palgrave Macmillan, New York.
Balaban, E., Johnson, E, B., & Kochendenfer, M., (2019). “Unifying System Health Management and Automated Decision Making”. Journal of Artificial Intelligent Research, (65), pp: 487-518.
Baumol, WJ. (2007). “On income distribution and growth”. J. Policy Model 29: 545-548.
Benhabib, J., (2003). “The tradeoff between inequality and growth”. Ann Econ and Finance 4:329-345.
Bernstein, J., (2013) The impact of inequality on growth. Washington, DC.
Bhargava A, Jamison DT, Lau LJ, Murray CJL (2001) Modeling the effects of health on economic growth. J Health Econ 20:423-440.
Bloom, DE., & Canning, D., (2008) “Population health and economic growth. Commission on Growth and Development working paper” no. 24. The International Bank for reconstruction and development/The World Bank on behalf of the Commission on Growth and Development, Washington D.C., Pp: 1-25.
Bloom, DE., Canning, D. & Sevilla, J., (2004) “The effect of health on economic growth: a production function approach”. World Dev 32(1):1-13.
Bloom, D. & Canning, D, (2000). “The Health and Wealth of Nations.” Science 287:1207–9.
Bokhari, F., Gai, Y., & Gottret, P, (2007). “Government Health Expenditures and Health Outcomes.” Health Economics, Vol.16, 257-273.
Boyd, D., (2014). “The Potential Impact of Alternative Health Care Spending Scenarios on Future State and Local Government Budgets”, The Future of U.S. Health Care Spending Conference, April 2014.
Castello-Climent, A., (2010) “Inequality and growth in advanced economies: an empirical investigation”. J Econ Inequal 8:293-321.
Cervellati, M. & Sunde, U., (2005). “Human Capital, Life Expectancy, and the Process of Development”, American Economic Review, 95(5), 1653-1672.
Cervellati, M. & Sunde, U., (2009). “Life Expectancy and Economic Growth: The Role of the Demographic Transition”, IZA Discussion Paper No.4160.
Chung, H. & Muntaner, C., (2006). “Political and Welfare State Determinants of Infant and Child Health Indicators: An Analysis of Wealthy Countries”, Social Science & Medicine, Volume 63, Issue 3, 829-842.
Cingano, F., (2014) Trends in income inequality and its impact on economic growth. OECD SEM working paper 163.
Cornia GA. & Court, J., (2001). Inequality, growth and poverty in the era of liberalization and globalization. Policy Brief 4 of the UNU World Institute for Development Economics Research (UNU/WIDER), Helsinki 2001.
Cutler, D., Deaton, A., & Lleras-Muney, A, (2006). “The Determinants of Mortality.” J. Econ. Perspectives 20 (Summer): 97-120.
Devarajan, S., Swaroop, V. & Zou, H., (1996). “The Composition of Public Expenditures and Economic Growth”, Journal of Monetary Economics 37, 313-344.
Dhrifi, A., (2018). “Health-Care Expenditures, Economic Growth and Infant Mortality: Evidence from Developed and Developing Countries”. CEPAL Review, No.125, pp: 69-91.
Filmer, D. & Pritchett, L., (1999). “The Impact of Public Spending on Health: Does Money Matter?”, Social Science and Medicine, 49 (1), 1309-1323.
Finlay, J., (2007) “The role of health in economic development”. PGDA Working Paper Series 21. Harvard University.
Fogel, RW., (1994) “Economic growth, population theory and physiology: the bearing of long-term processes on the making of economic policy”. Am EconRev 84(3):369-395.
Fogel, R.W., (1994). “Economic Growth, Population Theory and Physiology: The Bearing of Long-Term Process on the Making of Economic Policy”, NBER Working Paper, No.4638, Issued in February 1994.
Galor, O., (2011) Unified growth theory. Princeton University Press, Princeton.
Galor, O., (2005). “From Stagnation to Growth: Unified Growth Theory.” In: Handbook of Economic Growth, Vol. 1A, Edited By Philippe Aghion And Steven N. Durlauf. Amsterdam: Elsevier/North-Holland.
Gupta, S., Verhoeven, M. & Tiongson, T., (1999). “Does Higher Government Spending Buy Better Results in Education and Health Care?”, Working Paper 99/21. International Monetary Fund, Washington, DC.
Huang H-C, Lin Y-C, Yeh C-C (2009) “Joint determination of inequality and growth”. EconLetters 103:163-166.
Jaba, E., Balan, C.B., & Robu, L.B., (2014). “The Relationship between Life Expectancy at Birth Health Expenditures Estimated by a Cross-country and Time-series Analysis”, Procedia Economics and Finance, Vol.15, 108-114.
Jayachandran, S. & Lleras-Muney, A., (2009). “Life Expectancy and Human Capital Investments: Evidence from Maternal Mortality Declines”, Quarterly Journal Economics, 124(1), 349-398.
Kalemli-Ozcan, S., (2002). “Does the Mortality Decline Promote Economic Growth?”, J. Econ. Growth No. 7 (December): 411-39.
Kingsley, D., (1956). “The Amazing Decline of Mortality in Underdeveloped Areas.” A.E.R. Papers and Proc. 46 (May): 305-18.
La Fond, A., (1995). “Government’s Role: The Ministry of Health in Context”, In: Sustaining Primary Health Care, London: Save The Children, Earthscan Publication, 1995: 10-15.
Lundborg M. & Squire L., (2003) The Simultaneous Evolution of Growth and Inequality. Econ J., No. 113: 326-334.
Lustig, N., (2004). “Investing in Health for Economic Development”, First Edition, Universidad De Las Américas, Puebla Santa Catarina Mártir, Cholula, 72820 Puebla, México.
Macfarlane, S., Racelis, M. & Muli-Musiime, F., (2000). “Public Health in Developing Countries”, The Lancet, Vol. 356, September 2, 841-846.
Martinez, J. & Martineau, T., (1998). “Rethinking Human Resources: An Agenda for the Millennium”, Health Pol Plan 1998; 13: 345-58.
Mills, A., (2002), “What Can Be Done about the Private Health Sector in Low-Income Countries?”, Bulletin of The World Health Organization 80, No. 4 (2002): 325-30.
Montgomery, R., (2009). “Urban Poverty and Health in Developing Countries”, Population Bulletin, Vol.64, No.2.
Petersen, T. & Schoof, U. (2015) The impact of income inequality on economic growth. Impulse # 2015/05, Future Social Market Economy, Bertelsmann Stiftung, pp:1-12.
Preston, S. H., (1975). “The Changing Relation between Mortality and Level of Economic Development.” Population Studies No. 29 (July): 23-48.
Quamrul, A., Lester, A & Weil, D., (2007). “When Does Improving Health Raise GDP?” Manuscript (May), Brown Univ.
Rajkumar, A. S. & Swaroop, V., (2008). “Public Spending and Outcomes: Does Governance Matter?”, World Bank Working Papers No. 2840, Washington: World Bank.
Ray, D. & Linden, M., (2018). “Health, Inequality and Income: A Global Study Using Simultaneous Model”. Journal of Economic Structures, pp: 7-22.
Rivera. B. & Currais L., (2003) The effect of health investment on growth: a causality analysis. Int Adv Econ Res 9(4):312-323.
Shastry, GK. & Wei, DN., (2002). “How Much of Cross-Country Income Variation Is Explained by Health? Brown University & NBER”, Prepared for the European Economic Association Annual Meeting, August, pp: 1-13.
Strauss, J. & Duncan, T., (1998). “Health, Nutrition, and Economic Development.” J. Econ. Literature 36 (June): 766–817.
The World Health Organization, “The World Health Organization Quality of Life Assessment”, Field Trial Version for Adults. Administration Manual. WHO, Geneva. WHO Library Cataloguing in Publication Data. ISBN: 8451488268, (1995).
The World Health Organization, “World Health Report: Summary”, Forty-Eight World Health Assembly, A48/3, 22 March (1995).
The World Health Report, “Life in the 21st century A vision for all”, Report of the Director-General World Health Organization Geneva. WHO Library Cataloguing in Publication Data. ISBN: 9241561890, (1998).
Webber, DJ., (2002) “Polices to stimulate growth: Should we invest in health or education?”. Appl Econ 34:1633-1643.
Weil, DN., (2005) “Accounting for the effect of health on economic growth. Working Paper 11455”, NBER working paper series, Pp:1-610.
Weil, DN., (2009) “Economic growth. Prentice Hall”, Englewood Cliffs, pp 1-592.
Weil, D.N., (2007) “Accounting for the Effect of Health on Economic Growth”, Quarterly Journal of Economics, 122(3), 1265-1306.
Woods, R., (2008). “Long-Term Trends in Infant Mortality: Implications for Developing Countries”, Bulletin of The World Health Organization, Article ID: 07-043471; Article DOI: 10.2471/07.043471.