Abstract
This paper examines the relationship between health expenditure and economic growth in Iran for the period 1970-2007, based on the autoregressive distributed lag (ARDL) approach. The study finds a cointegrating relationship among real GDP, health expenditure, capital stock, oil revenues and education, although among them, health spending explains just a small part of the economic growth. The results indicate that while health care expenditures are among the most important factors in the lowering of infant mortality, they do not make a significant marginal contribution to the economic growth in Iran. This findings call for pressing reforms and improved allocation of resources in health sector.
Highlights
There is a large body of theoretical and empirical studies on the determinants of economic growth
In this paper we examine the short- and long-run relationships between health expenditure and real gross domestic production ( GDP) for Iran over the period 1970 to 2008, using Autoregressive Distributed Lag (ARDL) approach to cointegration and error correction models (ECM) suggested by Pesaran et al( 2001)
To allow for causality and dynamics and given that not all of our time-series are stationary to the same order (some are I(0) while others are I(1)), the cointegration technique suggested by Pesaran et al (2001), the autoregressive distributed lag model (ARDL) procedure will be used. the approach can be implemented regardless of whether the variables are integrated of order (1) or (0) and can be applied to small finite samples
Summary
There is a large body of theoretical and empirical studies on the determinants of economic growth. Much of the early work emphasized that growth in labor and the stock of physical capital are the key determinants of economic growth. There has been a growing concern to examine the impact of health on economic growth, brought about by the World Bank report (1993) on health and the seminal papers by Mushkin (1962) and Newhouse (1977). Barro (1996) introduce health as a capital productive asset and an engine of economic growth. Some Recent empirical work has sought to assess the association between health and aggregate economic performance and found that, given labour and capital, improvement in health status of population lead to a higher output (Barro and Sala-i-Martin 2004).
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