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Health investments and economic growth: a quantile regression approach

Francisca Rosendo Silva (Faculty of Economics, University of Coimbra, Coimbra, Portugal)
Marta Simões (CeBER and Faculty of Economics, University of Coimbra, Coimbra, Portugal)
João Sousa Andrade (CeBER and Faculty of Economics, University of Coimbra, Coimbra, Portugal)

International Journal of Development Issues

ISSN: 1446-8956

Article publication date: 30 May 2018

Issue publication date: 2 July 2018

1085

Abstract

Purpose

This study aims to analyse the relationship between health human capital and economic growth for a maximum sample of 92 countries over the period 1980-2010 taking into account countries’ heterogeneity by assessing how health variables affect different countries according to their position on the conditional growth distribution.

Design/methodology/approach

The paper estimates a growth regression applying the methodology proposed by Canay (2011) for regression by quantiles (Koenker, 1978, 2004, 2012a, 2012b) in a panel framework. Quantile regression analysis allows us to identify the growth determinants that present a non-linear relationship with growth and determine the policy implications specifically for underperforming versus over achieving countries in terms of output growth.

Findings

The authors’ findings indicate that better health is positively and robustly related to growth at all quantiles, but the quantitative importance of the respective coefficients differs across quantiles, in some cases, with the sign of the relationship greater for countries that recorded lower growth rates. These results apply to both positive (life expectancy) and negative (infant mortality rate, undernourishment) health status indicators.

Practical implications

Given the predominantly public nature of health funding, cuts in health expenditure should be carefully balanced even in times of public finances sustainability problems, particularly when growth slowdowns, as a decrease in the stock of health human capital could be particularly harmful for growth in under achievers. Additionally, the most effective interventions seem to be those affecting early childhood development that should receive from policymakers the necessary attention and resources.

Originality/value

This study contributes to the existing literature by answering the question of whether the growth effects of health human capital can differ in sign and/or magnitude depending on a country’s growth performance. The findings may help policymakers to design the most adequate growth promoting policies according to the behaviour of output growth.

Keywords

Acknowledgements

The authors would like to thank an anonymous reviewer for the insightful suggestions and comments that greatly contributed to improving the final version of the paper.

Citation

Rosendo Silva, F., Simões, M. and Sousa Andrade, J. (2018), "Health investments and economic growth: a quantile regression approach", International Journal of Development Issues, Vol. 17 No. 2, pp. 220-245. https://doi.org/10.1108/IJDI-12-2017-0200

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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