Investigating The Dynamic Effect of Healthcare Expenditure and Education Expenditure On Economic Growth in Organisation of Islamic Countries (OIC)

Abdul Wahab, Abdul Azeez Oluwanisola and Kefeli, Zurina and Hashim, Nurhazirah (2018): Investigating The Dynamic Effect of Healthcare Expenditure and Education Expenditure On Economic Growth in Organisation of Islamic Countries (OIC). Published in: 8th Islamic Banking Accounting and Finance (iBAF), 25th - 26th October 2018, Adya Hotel, Langkawi, Malaysia (25 October 2018): pp. 1-26.

Abstract

The socio-economic development level of any country has been significantly attached to the state of healthcare and well-being of its people. Moreover, it is unequivocal that healthy people have substantial influences on economic advancement of a country because when they live longer there is tendency that they will be more productive. On the other hand, the standpoint of education on economic growth cannot be underscored as it serves as method of evolution and progression of personalities and an essential indicator of broad production of the national income. Nevertheless, this paper examines the dynamic effect of healthcare expenditure and education expenditure on economic growth using evidence from Organization of Islamic Cooperation (OIC) countries. The study applied Pool Mean Group (PMG) method by using 1990 to 2015 data. The study reveals a robust long-run co-integrating relationship between healthcare expenditure, education expenditure, research and development and the economic growths of OIC countries. Besides, the short-run effects indicates that, healthcare expenditure per capita significantly impact economic growth of OIC countries, while the education expenditure and research and development (technology) were insignificantly impact economic growth of OIC countries in the short-run. Albeit, the findings of the study short-run specific-effects concluded that, there is existence of a co-integrating relationship between the healthcare, education, technology and economic growth in 36 out of the 56 OIC countries, while 20 other countries have no co-integrating relationship with the economic growths. However, the study suggests that healthcare and education are device to further attain economic growth and development in OIC countries if well managed and administered.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic growth; healthcare expenditure; education expenditure; OIC countries
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H51 - Government Expenditures and Health; H - Public Economics > H5 - National Government Expenditures and Related Policies > H52 - Government Expenditures and Education; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O57 - Comparative Studies of Countries

References

Asteriou, D. and Agiomirgianakis, G.M. (2001). Human Capital and Economic Growth-Time Series Evidence from Greece. Journal of Policy Modelling, p. 481-489.

Barro, R. J. (2001). Human Capital and Growth. American Economic Review. Vol. 91, 12-17.

Barro, R. J., and Lee, J. W. (2010). A new data set of educational attainment in the world, 1950-2010. Cambridge, MA, National Bureau of Economic Research.

Behbudi, D., Mamipour, S. and Karami, A. (2010). “Natural Resource Abundance, Human Capital, and Economic Growth in Petroleum Countries,” Journal of Economic Development. Vol. 35(3), p. 81-102.

Benhabib, J., and Spiegel, M. (1994). “The Role of Human Capital in Economic Development: Evidence from Aggregate Cross-Country Data,” Journal of Monetary Economics. Vol. 34(2), p. 143-174.

Bloom, D.E. and D. Canning. (2000). The Health and Wealth of Nations. Science, Vol. 287 (5456), p. 1207-1209.

Caselli, F., Esquivel, G., and Lefort, F. (1996). “Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics,” Journal of Economic Growth. Vol. 1(3), p. 363-389.

Clayton A. C. (2010). Assessing the Productive Efficiency of US Health Care: Comparison of Analytical Methods. Honors Projects 2010, p. 106. Available from: http://digitalcommons.iwu.edu/econ_honproj/106/

Cutler, D., Deaton, A., and Lleras-Muney, A. (2006). The determinants of mortality, Journal of Economic Perspectives, Vol. 20 (3), p. 97.

Cutler, D., and Lleras-Muney, A. (2007). “Education and Health”, National Poverty Center, Gerald R. Ford School of Public Policy, University of Michigan.

Doğan, İ., Tülüce, N. S. and Doğan, A. 2014. Dynamics of Health Expenditures in OECD Countries: Panel ARDL Approach. Theoretical Economics Letters, Vol. 4, p. 649-655.

Gyimah-Brempong, K., Paddison, O. and Mitiku, W. (2006). Higher Education and Economic Growth in Africa. Journal of Development Studies. Vol. 42, p. 509-529.

Gylfason, T. and Zoega, G. (2003). “Education, Social Equality and Economic Growth: A View of the Landscape”, CESifo Economic Studies. Vol. 49, p. 557-579.

Hanushek, E. A., and Kimko, D. D. (2000). “Schooling, Labor-Force Quality and the Growth of Nations,” American Economic Review. Vol. 90(5), p. 1184-1208.

Hartwig, J. (2008). What Drives Healthcare Expenditure? Baumol's Model of Unbalanced Growth Revisited. Journal of Health Economics. Vol. 27, p. 603-623.

Hassan, M.S. (2012). The Triangular Causality among Education, Health and Economic Growth: A Time Series Analysis of Pakistan. World Applied Sciences Journal. Vol. 18(2), p. 196-207.

Ioana, P. L., Andrei, A. and Cristian, H. (2013). A Statistical Analysis of the Relationship between Education and Economic Growth in the European Union Area Having Economical Implications. Economics Series. Vol. 23 (4), p. 114-123

Jack, W. and M. Lewis. (2009). Health Investment and Economic Growth: Macroeconomic Evidence and Microeconomic Foundations. Washington: World Bank.

Karim, D. O. (2016). Health Expenditure and Economic Growth Nexus: An ARDL-Type Analysis for Nigeria. Imperial Journal of Interdisciplinary Research (IJIR), Vol. 2 (2), p. 516.

Keller, K. R. I. (2006). Investment in Primary, Secondary, and Higher Education and the Effects on Economic Growth. Contemporary Economic Policy. Vol. 24, p. 18-34.

Kumar, C. S. (2006). “Human Capital and Growth Empirics,” The Journal of Developing Areas. Vol. 40(1), p. 153-179.

Levine, R. and Renelt, D. (1992). A Sensitivity Analysis of Cross-Country Growth Regressions. The American Economic Review. Vol. 82 (4), p. 942-963.

Li, H., and Huang, L. (2009). Health, Education, and Economic Growth in China: Empirical Findings and Implications. China Economic Review. Vol. 20, p. 374-387.

Lucas, Robert E. (1988). On Mechanics of Economic Development. Journal of Monetary Economics. Vol. 22(1), p. 3-42.

Maksymenko, S., and Rabani, A. (2011). “Economic Reforms, Human Capital, and Economic Growth in India and South Korea: A Cointegration Analysis,” Journal of Economic Development. Vol. 36 (2), p. 39-59.

Mankiw, N.G., Romer, D., and Weil, D. N. (1992). “A Contribution to the Empirics of Economic Growth,” Quarterly Journal of Economics. Vol. 107, p. 407-437.

Mehrara, M. and M. Musai. (2011). Health Expenditure and Economic Growth: An ARDL Approach for the Case of Iran. Journal of Economics and Behavioural Studies. Vol. 3 (4), p. 249-256.

Mehrara, M., Fazaeli, A. (2010). The relationship between health expenditures and economic growth in the Middle East and North Africa (MENA), Journal of Modiriat Salamat. Vol. 35, p. 49-59.

Musila, J. W. and Belassi, W. (2004). The Impact of Education Expenditures on Economic Growth in Uganda: Evidence from Time Series Data. The Journal of Developing Areas. Vol. 38, p. 123-133.

OIC Health Report. (2011). OIC Health Report, Published by the Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRIC), Turkey. Özsoy, C. (2008). Analysis of the relationship between Education and Economic Growth in Turkey. http://www.beykon.org/2009/BAHAR/C.Ozsoy.pdf Retrieved, June 25, 2016.

Pesaran, M. H., Shin, Y., and Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446), 621-634.

Pritchett, L. (1996). “Where has all the Education Gone?” Policy Research Working Paper, 581, World Bank, Washington.

Psacharopoulos, G. and Woodhall, M. (1985). Education for Development: An Analysis of Investment Choices, World Bank Publication. New York: Oxford University Press.

Rehman, N. U., and Khan, K. J. (2012). Does health, accelerate economic growth in Pakistan? International journal of Asian social science. Vol. 2(4), p. 506-512.

Romer, Paul. M. (1990). Endogenous Technological Change. Journal of Political Economy, vol. 98, no. 5, p. S71-S102.

Schultz, Paul. (1996). Accounting for Public Expenditures on Education: An International Panel Study. in T.P. Schultz. Research in population Economics. 8: JAI Press.

Self, S. and Grabowski, R. (2004). Does Education at all Levels Cause Growth? India, a Case Study. Economics of Education Review. Vol. 23, p. 47-55.

Simões, M. C. N. (2011). Education Composition and Growth: A Pooled Mean Group Analysis of OECD Countries. PANOECONOMICUS, Vol. 4, p. 455-471.

Tang, C. F. (2011). Multivariate Granger Causality and the Dynamic Relationship between Healthcare Spending, Income and Related Price of Healthcare in Malaysia. Hitotsubashi Journal of Economics. Vol. 52, p. 199-214.

Türkmen, F. (2002). Investigation of Economic and Social Benefits of Education and Economic Growth in Turkey. Ankara: SPO, Expertise Thesis. Publication no: SPO: 2665. General Directorate of Social Sectors and Coordination.

Wahab, A. A. O. A. and Kefeli, Z. (2017). Modeling the Effect of Healthcare Expenditure and Education Expenditure on Labour Productivity: A Study on OIC Countries. Journal of Business and Economics Review. Vol. 2 (2), p. 31 – 37.

Wang, K. M. (2011). Healthcare expenditure and economic growth: Quantile panel-type analysis. Economic Modelling. Vol. 28, p. 1536-1549.

Wang, Z. (2009). The determinants of health expenditures: evidence from US state-level data. Applied Economics. Vol. 41(4), p. 429-435.

Webber, D. J. (2002). “Policies to Stimulate Growth: Should We Invest in Health or Education,” Applied Economics. Vol. 34, p. 1633-1643.

Wolff, E. N. (2001). The Role of Education in the Postwar Productivity Convergence among OECD Countries. Industrial and Corporate Change. Vol. 10 (3), p. 735-759.

Woodhall, M. (1987). Economics of Education: A Review. In: G. Psacharopoulos, Economics of Education: Research and Studies, Pergamon Press, Oxford, 1-7.

Yardimcioğlu, F., Gürdal, T., and Altundemir, M. E. (2014). Education and Economic Growth: A Panel Cointegration Approach in OECD Countries (1980-2008). Education and Science. Vol. 39 (173), p. 1-12.