Abstract
Development policies often focus on health as human capital and require increased health expenditure in developing countries. This paper analyses the extent to which health expenditure is explained by growth in the West African Economic Monetary Union (WAEMU) zone for the period of 2000–2015. Integrated economies were assumed where an increase in gross domestic product per capita (named income) in one country leads to a change in fiscal revenues and hence public spending in that country (direct effect) as well as neighbouring countries (indirect effect). Spatial econometric models were used to test for the existence and estimate the magnitude of spatial externalities. The panel causality results highlight externalities at the WAEMU regional level. Applying the Hausman test, Akaike information criterion, and Wald test to the data permits estimation of a dynamic spatial Durbin model with individual and time fixed effects. Decomposing the results of the model into both short- and long-term direct and indirect (spillover) effects shows that only the short-term effects were significant. The income elasticity of health spending was equal to 1 for the direct effect of economic growth in WAEMU countries. Therefore, health is a necessity at the country level in the WAEMU zone. Income elasticity was greater than 1 for growth spillover effects. Health is a luxury at the regional level. These findings underscore the need for more involvement of national governments in the health sector to redistribute healthcare resources. In addition, health and growth policies must be coordinated in WAEMU countries.
Similar content being viewed by others
References
Baltagi, B. H., & Li, D. (2004). Prediction in the panel data model with spatial correlation. In L. Anselin, R. J. Florax, & S. J. Rey (Eds.), Advances in spatial econometrics (pp. 1–515). Berlin: Springer-Verlag.
Baltagi, B. H., Lagravinese, R., Moscone, F., & Tosetti, E. (2017). Health care expenditure and income: A global perspective. Health Economics, 26(7), 863–874.
Barros, P. P. (1998). The black box of health care expenditure determinants. Health Economics, 7(6), 533–544.
Becker, G. S. (2007). Health as human capital: Synthesis and extensions. Oxford Economic Papers, 379(59), 379–410.
Bedir, S. (2016). Healthcare expenditure and economic growth in developing countries. Advances in Economics and Business, 4(2), 76–86.
Belotti, F., Hughes, G., & Mortari, A. P. (2016). Spatial panel data models using stata. The Stata Journal, 17(1), 139–180.
Cameron, C. A., Gelbach, J. B., & Miller, D. L. (2011). Robust inference with multiway clustering. Journal of Business & Economics Statistics, 29(2), 238–249.
Debarsy, N., Ertur, C., & Lesage, J. P. (2012). Interpreting dynamic space-time panel data models. Statistical Methodology, Elsevier, 9, 158–171.
Dumitrescu, E. I., & Hurlin, C. (2012). Testing for granger non-causality in heterogeneous panels. Economic Modelling, 29, 1450–1460.
Ehrlich, I. (2000). Uncertain lifetime, life protection, and the value of life saving. Journal of Health Economics, (19), 341–367.
Elhorst, J. (2010). Spatial econometrics from cross-sectional data to spatial panels. Groningen: Springer Heidelberg.
Feindouno, S., & Goujon, M. (2019). Human assets index: Insights from a retrospective series analysis. Social Indicators Research, 141(3), 959–984.
Getis, A. (2007). Reflections on spatial autocorrelation. Regional Science and Urban Economics, 37, 491–496.
Hansen, P., & King, A. (1996). The determinants of health care expenditure: A cointegration approach. Journal of Health Economics, 15, 127–137.
Hitiris, T. (1997). Health care expenditure and integration in the countries of the European Union. Applied Economics, 29(1), 1–6.
Hitiris, T., & Posnett, J. (1992). The determinants and effects of health expenditure in developed countries. Journal of Health Economics, 11, 173–181.
Khan, M. A., & Ul Husnain, M. I. (2019). Is health care a luxury or necessity good? Evidence from Asian countries. Journal of Health Economics and Management, 19(2), 213–233.
Knowles, S., & Owen, D. P. (1995). Health capital and cross-country variation in income per capita in the Mankiw-Romer-Weil model. Economics Letters, 48, 99–106.
Knowles, S., & Owen, D. P. (1997). Education and health in an effective labour empirical growth model. The Economic Record, 73(223), 314–328.
Kumar, S. (2013). Systems GMM estimates of the health care spending and GDP relationship: A note. The European Journal of Health Economics, 14(3), 503–506.
Lago-Peñas, S., Cantarero-Prieto, D., & Blázquez-Fernández, C. (2013). On the relationship between GDP and health care expenditure: A new look. Economic Modelling, 32, 124–129.
Lan, J. Y. C. (2017). Achieving and sustaining universal health coverage: Fiscal reform of the National Health Insurance in Taiwan. Applied Health Economics and Health Policy, 15(6), 717–731.
Lee, L. F., & Yu, J. (2010). Estimation of spatial autoregressive panel data models with fixed effects. Journal of Econometrics, 154, 165–185.
Lee, L.-F., de Jong, R., & Yu, J. (2008). Quasi-maximum likelihood estimators for spatial dynamic panel data with fixed effects when both n and T are large. Journal of Econometrics, 146(1), 118–134.
LeSage, J., & Pace, K. R. (2009). Introduction to spatial econometrics. London: Taylor & Francis Group, LLC.
Liu, D., Li, R., & Wang, Z. (2011). Testing for structural breaks in panel varying coefficient models: With an application to OECD health expenditure. Empirical Economics, 40, 95–118.
Lopez, L., & Weber, S. (2017). Testing for granger causality in panel data. The Stata Journal, 17(4), 972–984.
Lucas Jr., R. E. (1993). Making a miracle. Econometrica, 61(2), 251–272.
Mehrara, M., Musai, M., & Amiri, H. (2010). The relationship between health expenditure and GDP in OECD countries using PSTR (pp. 50–58). Finance and Administrative Sciences: European Journal of Economics.
Murphy, K., & Topel, R. (2003). The economic value of medical research. In K. Murphy & R. Topel (Eds.), Measuring the Gains from Medical Research: An Economic Approach. Chicago: University of Chicago Press.
Mushkin, S. J. (1962). Health as an investment. Journal of Political Economy, 70(5), 129–157.
Narayan, P. K., Narayan, S., & Smyth, R. (2011). Is health care really a luxury in OECD countries? Evidence from alternative price deflators. Applied Economics, 43(25), 3631–3643.
Newhouse, J. P. (1997). Medical-care expenditure: A cross-National Survey. The Journal of Human Resources, 12(1), 115–125.
Ojede, A., Atems, B., & Yamarik, S. (2018). The direct and indirect (spillover) effects of productive government spending on state economic growth. Growth and Change, 49(1), 122–141.
Ouardighi, J. E. (2002, Mars). Dépendance spatiale sur données de panel : Application à la relation Brevets-R&D au niveau régional. L'Actualité économique, 78(1), 67–86.
Parkin, D., McGuire, A., & Yule, B. (1987). Aggregate health care expenditures and national income: Is health care a luxuty good? Journal of Health Economics, 6, 109–427.
Rana, R. H., Alam, K., & Gow, J. (2019). Health expenditure and gross domestic product: Causality analysis by income level. International Journal of Health Econonomics and Management, 1–23.
Rodríguez, A. F., & Valdés, M. N. (2019). Health care expenditures and GDP in Latin American and OECD countries: A comparison using a panel cointegration approach. International Journal of Health Econonomics and Management, 19(2), 115–153.
Sen, A. (2005). Is health care a luxury? New evidence from OECD data. International Journal of Health Care Finance and Economics, 5(2), 147–164.
Tang, C. F. (2009). An examination of the government spending and economic growth nexus for Malaysia using the leveraged bootstrap simulation approach. Global Economic Review, 38(2), 215–227.
Vaya, E., Lopez-Bazo, E., Moreno, R., & Surinach, J. (2004). Growth and Externalities Across Economies: An Empirical Analysis Using Spatial Econometrics. In L. Anselin, R. J. Florax, & S. J. Rey (Eds.), Advances in Spatial Econometrics. Methodology, Tools and Applications (pp. 433–455). New York: Springer Berlin Heidelberg.
World Bank. (2018). World Bank Indicators. Datacatalog. Retrieved May 05, 2018, From World Bank indicators. Datacatalog: http://datacatalog.worldbank.org
World Health Organisation. (2018). World Health Statistics. Retrieved May 10, 2018, from http://www.who.int/gho/ihr/en/.
Yu, T. H.-K., & Chu, H. Y. (2007). Is health care really a luxury? A demand and supply approach. Applied Economics, 39(9), 1127–1131.
Zeng, Z., Qi, Y., & Ge, M. (2018). Is health care a necessity or a luxury? Evidence from urban China. Applied Economics Letters, 25(17), 1204–1207.
Acknowledgments
The author would like to thank Zallé Oumarou from Université Norbert Zongo de Koudougou in Burkina Faso for useful discussions.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Electronic supplementary material
ESM 1
(DOCX 41 kb)
Rights and permissions
About this article
Cite this article
Traoré, O. Economic Growth and Human Capital Accumulation across Countries: Evidence from WAEMU Region. Int Adv Econ Res 26, 147–159 (2020). https://doi.org/10.1007/s11294-020-09782-4
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11294-020-09782-4
Keywords
- Healthcare spending
- Gross domestic product
- Panel Granger causality
- Spatial spillover effects
- Maximum likelihood estimates