PANEL DATA ANALYSIS ON THE ROLE OF HEALTH ON ECONOMIC GROWTH IN SUB-SAHARAN AFRICA (1990-2011)

PANEL DATA ANALYSIS ON THE ROLE OF HEALTH ON ECONOMIC GROWTH IN SUB-SAHARAN AFRICA (1990-2011) ( Economics Education Project Topics)

ABSTRACT

This study empirically examines the role of health on economic growth in Sub-Saharan Africa using a panel data from 1990 to 2011. The study employed a panel data analysis in which the random effects model was used to examine the relationships among variables. Each of the explanatory variables were tested for multicollinearity using the Variance Inflation Factor (VIF) which was not found among variables, and other tests such as the Hausman test which showed that the random effects model is the most preferred, the heteroskedasticity test which was also conducted using the Modified Wald test and found the presence of heteroskedasticity which was corrected in the model and the random effects test using the Breush-Pagan lagrange multiplier. The random effects model results show that health in terms of life expectancy has an inelastic and significant influence on gross domestic product per capita while in terms of the prevalence of HIV showed an inelastic but did not have a significant influence on gross domestic product per capita. Another important result is that economic growth had a positive relationship with gross fixed capita formation, secondary school enrolment and the prevalence of HIV while it had a negative relationship with total labour force and life expectancy. Thus, we conclude that although health in terms of mortality and morbidity had an inelastic relationship on gross domestic product per capita, mortality showed a significant influence while morbidity had no significant influence on economic growth in Sub-Saharan African.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Health is pertinent to human capital which is one of the main inputs for economic growth and development. The World Health Organization (1946) defined health as “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity”. “Many factors combine together to affect the health of individuals and communities whether people are healthy or not, is determined by their circumstances and environment. To a large extent factors such as where we live, the state of our environment, genetics, our income and educational level, and our relationships with friends and family all have considerable impacts on health whereas the more commonly considered factors such as access and use of health care services often have less of an impact” (WHO, 2013).

According to WHO (2013) the determinants of health include: the social and economic environment, the physical environment, and the person’s individual characteristics and behaviour. The Sub-Sahara Countries in Africa include most of the countries located south of the Sahara, which is most of Africa. According to Afro Central (2013), “these countries are considered extremely rural with little or no power generation to the sparse communities, making health care a luxury often unheard of or not even thought about. Much of the culture is steeped in ancient rituals and tradition and are non believers in modern medicine and general health care”. This describes the attitude of people towards modern Health care services as they still prefer their traditional and ancient health care services. Health also plays an important role in economic growth, as the saying goes ‘Health is Wealth’. Health is a determinant of human capital as according to Barro (1996) health is ‘a capital productive asset and an engine of economic growth’. Also, human capital formulation which consists of health and education leads to the attainment of economic growth as according to Grossman (1972), Bloom and Canning (2000) individuals who are healthy in terms of assimilating knowledge are more efficient and as a result of this obtain higher productivity (Rico, Turrbiates and Hernandez, 2005).

PANEL DATA ANALYSIS ON THE ROLE OF HEALTH ON ECONOMIC GROWTH IN SUB-SAHARAN AFRICA (1990-2011) ( Economics Education Project Topics)