CAPITAL FORMATION AND HEALTH OUTCOMES IN MIDDLE-INCOME COUNTRIES
Downloads
Introduction: Understanding how much a country’s health system spends on infrastructure, machinery, and types of equipment is crucial for policymaking and analysis. Although health systems continue to be labor-intensive, capital has been increasingly important in producing health services in recent decades. Considering the growing importance of diagnostic and therapeutic types of equipment, as well as the recent rise of information, computers, and technology in healthcare services being capital intensive, hence, it is imperative to determine the impacts of capital formation on health outcomes in middle-income countries.
Methods: The study used the World Bank rating, from 2000 to 2023. The system generalized method of moments (SGMM) was adopted to account for endogeneity. The World Development Indicators (WDI), and World Governance Indicators (WGI) data were used. The model's validity was assessed using the AR (1) and the AR (2) tests, while the instrumental variables were validated using Sargan and Hansen tests. Inferences were drawn using a 5% threshold of significance.
Results: Results showed that capital formation confirmed a crowd-out relationship between morbidity rates and crude death, while life expectancy has a positive relationship with capital formation in middle-income countries. Life expectancy has a positive relationship and is statistically significant at a 5% level.
Conclusion and suggestion: Therefore, the study recommended that middle-income countries must generate savings and investments through individual savings or government policy to improve their healthcare system since countries with a high level of household savings can accumulate funds and produce capital goods faster.
Barro, R. J. (1996). Determinants of economic growth: A cross-country empirical study. National Bureau of Economic Research Working Paper 5698.
Becker, G. S. (2007). Health as human capital: Synthesis and extensions. Oxford Economic Papers, 59(3), 379–410. https:// doi.org/10.1093/oep/gpm020
Blázquez-Fernández, C., Cantarero-Prieto, D., Perez-Gonzalez, P., & Llorca-Díaz, J. (2015). Does health enhance economic growth? Evidence from Spain. Applied Economic Letters, 22(11), 860–864. https://doi.org/10.1080/13504851.2014.982851
Bloom D. Canning D. & Chan K. (2005). Higher Education and Economic Development in Africa. Harvard University.
Bloom, D. E., Canning, D., Kotschy, R., Prettner, K & Schünemann, J., (2018). Health and Economic Growth: Reconciling the Micro and Macro Evidence. IZA – Institute of Labour Economics.
Bloom, D., Canning, D., Kotschy, R., Prettner, K., & Schunemann, J. (2019). Health and economic growth: Reconciling the micro and macro evidence e, NBER Working Paper 26003. National Bureau of Economic Research, Inc.
Bloom, D., & Canning, D. (2003). The health and poverty of nations: From theory to practice. Journal of Human Development, 4(1), 47–71. https://doi.org/10.1080/1464988032000051487
Blundell, R., & Bond, S. (1998). “Initial conditions and moment restrictions in dynamic panel data models.” Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076 (98)00009-8
Ehrlich, I., & Lui, F. (1991). Intergenerational trade, longevity and economic growth. Journal of Political Economy, 99(5), 1029–1059. https://doi.org/10.1086/261788
Howitt, P. (2005). Health, human capital, and economic growth: A Schumpeterian perspective. In G. Lopez-Casasnovas, B. Rivera & L. Currais (Eds.), Health and economic growth: Findings and policy implications (pp.19–40). Cambridge, MA: MIT Press.
Kalemli-Ozcan, S., Ryder, H., & Weil, D. (2000). Mortality decline, human capital investment, and economic growth. Journal of Development Economics, 62(1), 1–23. https://doi.org/10.1016/S0304-3878(00)00073-0
Lenhart, O. (2019). The effects of health shocks on labor market outcomes: Evidence from UK panel data. European Journal of Health Economics, 20(1), 83–98. https://doi.org/10.1007/s10198-018-0985-z
Monterubbianesi, P. (2014). El rol de la salud en el proceso de crecimiento económico: Una revisión de la literatura. Cuadernos de Economía, 33(62), 91–121 https://doi.org/10.15446/cuad.econ.v33n62.43667
Monterubbianesi, P., Grandes, M., & Dabús, C. (2017). New evidence of the health status and economic growth relationship. Panoeconomicus, Savez Ekonomista Vojvodine, Novi Sad, Serbia, 64(4), 439–459.
Roodman, D. (2009). How to do xtabond 2: An introduction to “Difference” and “System” GMM in Stata. The Stata Journal, 9(1), 86–136.
Samargandi, N., Fidrmuc, J., & Ghosh, S. (2013). Is the relationship between financial development and economic growth monotonic for middle-income countries? Is there a relationship between financial development and economics? World Development, 68, 66-81.
Samek, L., Darko, C., King, W., Sidhu, S. V., Parmar, M., Foliano, F., & Vassilev, G. (2019). Provision of Human Capital Evidence Review. A Report for the Office for National Statistics, 1-129
Weil, D. N. (2001). Accounting for the effect of health on economic growth. Providence, RI: Brown University.
Copyright (c) 2025 Felix Aberu, Kunle Bankole Osinusi, Kareem Abiodun Arikewuyo, Nurudeen Abiodun Lawal
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with Jurnal Ekonomi dan Bisnis Airlangga agree to the following terms:The journal allows the author to hold the copyright of the article without restrictions.
The journal allows the author(s) to retain publishing rights without restrictions
The legal formal aspect of journal publication accessibility refers to Creative Commons Attribution Share-Alike (CC BY-SA).
Jurnal Ekonomi dan Bisnis Airlangga (JEBA) is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License
