The Impact of Health on Gross Regional Domestic Product: Empirical Study from West Java

Abstract

The economists focused on study about the impact of health on economic performance. Health is one of important issue of human being as indicator of welfare of a nation. Health is one of human capital in every economic activity. It is very related to promote economic growth. The dezentralisation proceses in Indonesia was developed to conduct local economic development. The study of the importance of human capital to local economic growth are still needed, especially in developing countries. It is important to know the health status at the distric or city level to ensure the social welfare of the community. The purpose of this study was to estimate the influence of health on Gross Regional Domestic Product in West Java Indonesia. West Java is one of the greatest local economic development in Indonesia, because some of the city in West Java is located near the capital city of Indonesia, which is there are many industrial and manufacturing cluster. West Java also have high population dencity, and it is such as a big potential having demography bonus. The local government in West Java had many strategic programs in order to increase the public health status. West Java also has a good human development among others provinces in Indonesia. Human capital is one of vital production factors in economic. For estimation, we conducted panel data in 27 district and city in West Java during 2012-2017. Health was proxied by fertility rate, infant mortality rate, and proportion of population (> age 65). We analyzed the unbalanced panel data using three model, common effect model, fixed effect model, and random effect model. The result indicated that the both from Chow test and Hausmann test showed the fixed effect model was the best estimation. Infant mortality rate had a significant and positive impact on Gross Regional Domestic Product. It was indicated that there is a serious problem and need a solution how to decrease the infant mortality rate in West Java. There was an indication that in less-developed country exist a high infant mortality rate. It is logic, because the high human capital start from the healthy of infants. The proportion of population also had a significant impact on Gross Regional Domestic Product, it is also indicated that the local government have to manage the labor force related to the proportion of population. Since the proportion of population have an important role in supporting local economic development. Identification the proportion of population can be formulated an effective policy toward increasing health status. While the fertility rate had negative impact to Gross Regional Domestic Product. In developing country such as Indonesia, the fertility rate is one of the main target of local government policy. There are still many woman under age in Indonesia who gave birth and they were not ready yet to raise children. Some previews study found that there was an important role of health in promote the performance economic in both developed countries and less developed countries. In some cases, health status had an impact directly or indirectly on economic growth. It is important to analyzes the impact of health at the local level because during the dezentralization era, the role of regions was very crucial. The limitation of this study is developed unbalanced panel data, and did not insert the economics variable to the model. Thus, the local government should increase the quality of services of health and improve public health in West Java.