IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v114y2022ics0264999322001936.html
   My bibliography  Save this article

The effects of health conditions on financial sector development

Author

Listed:
  • Donou-Adonsou, Ficawoyi

Abstract

The relationship between the financial sector and health sector has been under investigated in the literature. Based on the efficiency wage theory, one can conjecture that a healthy worker, unlike the unhealthy one, can work, save, and contribute more to widening the financial sector. Using panel data over the period 1995–2016, we examine whether improvements in health conditions can help explain the expansion of the financial system in Sub-Saharan Africa. The results indicate that better health conditions contribute to financial development. Specifically, higher life expectancy, lower infant mortality, higher health expenditure, and lower out-of-pocket expenditure significantly contribute to financial sector development. These results suggest that better health conditions increase domestic savings and foster financial development. The study, therefore, enhances the importance of health status and spending on health infrastructure in economic development and calls on policymakers to invest in human health.

Suggested Citation

  • Donou-Adonsou, Ficawoyi, 2022. "The effects of health conditions on financial sector development," Economic Modelling, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:ecmode:v:114:y:2022:i:c:s0264999322001936
    DOI: 10.1016/j.econmod.2022.105947
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999322001936
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2022.105947?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Filoso, Valerio & Papagni, Erasmo, 2015. "Fertility choice and financial development," European Journal of Political Economy, Elsevier, vol. 37(C), pages 160-177.
    2. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    4. Donou-Adonsou, Ficawoyi & Sylwester, Kevin, 2017. "Growth effect of banks and microfinance: Evidence from developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 44-56.
    5. Mehmet Nar, 2020. "The Relationship Between Human Capital and Financial Development: A Case Study of Turkey," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(1), pages 157-170, January.
    6. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084, Central Bank of Chile.
    7. Ficawoyi Donou-Adonsou & Gyan Pradhan & Hem C. Basnet, 2020. "Remittance inflows and financial development: evidence from the top recipient countries in Sub-Saharan Africa," Applied Economics, Taylor & Francis Journals, vol. 52(53), pages 5807-5820, November.
    8. Jaison Chireshe & Matthew K. Ocran & Francesco Tajani, 2020. "Financial development and health care expenditure in Sub Saharan Africa Countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1771878-177, January.
    9. Marika Cabral & Marcus Dillender, 2020. "The Impact of Benefit Generosity on Workers’ Compensation Claims: Evidence and Implications," NBER Working Papers 26976, National Bureau of Economic Research, Inc.
    10. Mishkin, Frederic S., 2009. "Globalization and financial development," Journal of Development Economics, Elsevier, vol. 89(2), pages 164-169, July.
    11. Gries, Thomas & Kraft, Manfred & Meierrieks, Daniel, 2009. "Linkages Between Financial Deepening, Trade Openness, and Economic Development: Causality Evidence from Sub-Saharan Africa," World Development, Elsevier, vol. 37(12), pages 1849-1860, December.
    12. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
    13. Manasi Deshpande & Tal Gross & Yalun Su, 2021. "Disability and Distress: The Effect of Disability Programs on Financial Outcomes," American Economic Journal: Applied Economics, American Economic Association, vol. 13(2), pages 151-178, April.
    14. Zaidi, Syed Anees Haider & Wei, Zixiang & Gedikli, Ayfer & Zafar, Muhammad Wasif & Hou, Fujun & Iftikhar, Yaser, 2019. "The impact of globalization, natural resources abundance, and human capital on financial development: Evidence from thirty-one OECD countries," Resources Policy, Elsevier, vol. 64(C).
    15. Sadorsky, Perry, 2011. "Financial development and energy consumption in Central and Eastern European frontier economies," Energy Policy, Elsevier, vol. 39(2), pages 999-1006, February.
    16. Wolde-Rufael, Yemane, 2009. "Re-examining the financial development and economic growth nexus in Kenya," Economic Modelling, Elsevier, vol. 26(6), pages 1140-1146, November.
    17. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
    18. Aggarwal, Reena & Demirgüç-Kunt, Asli & Pería, Maria Soledad Martínez, 2011. "Do remittances promote financial development?," Journal of Development Economics, Elsevier, vol. 96(2), pages 255-264, November.
    19. James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring.
    20. Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 221-248, April.
    21. Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009. "Financial development and openness: Evidence from panel data," Journal of Development Economics, Elsevier, vol. 89(2), pages 285-296, July.
    22. Md Samsul Alam & Md Shahidul Islam & Syed Jawad Hussain Shahzad & Shazia Bilal, 2021. "Rapid rise of life expectancy in Bangladesh: Does financial development matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 4918-4931, October.
    23. Lim, Kyoung Mook, 2020. "Public provision of health insurance and aggregate saving in an overlapping generations model with endogenous health risk: The South Korean case," Economic Modelling, Elsevier, vol. 91(C), pages 233-246.
    24. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    25. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
    26. repec:zbw:bofitp:2020_012 is not listed on IDEAS
    27. Rezwanul Hasan Rana & Khorshed Alam & Jeff Gow, 2021. "Financial development and health expenditure nexus: A global perspective," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1050-1063, January.
    28. Bronchetti, Erin Todd, 2012. "Workers' compensation and consumption smoothing," Journal of Public Economics, Elsevier, vol. 96(5), pages 495-508.
    29. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    30. Kochar, Anjini, 1995. "Explaining Household Vulnerability to Idiosyncratic Income Shocks," American Economic Review, American Economic Association, vol. 85(2), pages 159-164, May.
    31. Funke, Michael & Tsang, Andrew, 2020. "The People’s bank of China’s response to the coronavirus pandemic: A quantitative assessment," Economic Modelling, Elsevier, vol. 93(C), pages 465-473.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Shuai & Zhan, Shuwei & Zhan, Shurui & Zhan, Minghua, 2023. "How does financial development change the effect of the bank lending channel of monetary policy in developing countries?—Evidence from China," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 502-519.
    2. Yuan Zhu & Bingyue Wan & Lixin Tian, 2022. "Protection of Intellectual Property Rights, Financial Development and Green Low-Carbon Endogenous Economic Growth," Sustainability, MDPI, vol. 14(20), pages 1-20, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nasreen, Samia & Mahalik, Mantu Kumar & Shahbaz, Muhammad & Abbas, Qaisar, 2020. "How do financial globalization, institutions and economic growth impact financial sector development in European countries?," Research in International Business and Finance, Elsevier, vol. 54(C).
    2. Raja Almarzoqi & Sami Ben Naceur & Akshay Kotak, 2015. "What Matters for Financial Development and Stability?," IMF Working Papers 2015/173, International Monetary Fund.
    3. Jean-Pierre Allegret & Sana Azzabi, 2014. "Intégration financière internationale et croissance économique dans les pays émergents et en développement : le canal du développement financier," Revue d’économie du développement, De Boeck Université, vol. 22(3), pages 27-68.
    4. Zhang, Chengsi & Zhu, Yueteng & Lu, Zhe, 2015. "Trade openness, financial openness, and financial development in China," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 287-309.
    5. Kizito Uyi Ehigiamusoe & Hooi Hooi Lean, 2018. "Tripartite Analysis of Financial Development, Trade Openness and Economic Growth: Evidence from Ghana, Nigeria and South Africa," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 12(2), June.
    6. Nahed Zghidi & Zouheir Abida, 2014. "Financial Development, Trade Openness and Economic Growth in North African Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 17(53), pages 91-120, September.
    7. Chris Doucouliagos & Jakob de Haan & Jan-Egbert Sturm, 2022. "What drives financial development? A Meta-regression analysis [A new database of financial reforms]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 840-868.
    8. Kim, Dong-Hyeon & Lin, Shu-Chin, 2023. "Income inequality, inflation and financial development," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 468-487.
    9. Imen Mohamed Sghaier, 2023. "Trade openness, financial development and economic growth in North African countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1729-1740, April.
    10. Ho, Sin-Yu & Njindan Iyke, Bernard, 2018. "Short- and Long-term Impact of Trade Openness on Financial Development in Sub-Saharan Africa," MPRA Paper 84272, University Library of Munich, Germany.
    11. Siong Law & W. Azman-Saini, 2012. "Institutional quality, governance, and financial development," Economics of Governance, Springer, vol. 13(3), pages 217-236, September.
    12. Chengsi Zhang & Yueteng Zhu, 2020. "The interest group theory of financial development in China: Openness and the role of interest groups," The World Economy, Wiley Blackwell, vol. 43(4), pages 982-999, April.
    13. Muhammad Shahbaz & Hrushikesh Mallick & Mantu Kumar Mahalik & Shawkat Hammoudeh, 2018. "Is globalization detrimental to financial development? Further evidence from a very large emerging economy with significant orientation towards policies," Applied Economics, Taylor & Francis Journals, vol. 50(6), pages 574-595, February.
    14. Olufemi Adewale Aluko & Muazu Ibrahim, 2020. "On the macroeconomic determinants of financial institutions development in sub-Saharan Africa," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(1), pages 69-85, March.
    15. Abel Mawuko Agoba & Joshua Yindenaba Abor & Kofi Achampong Osei & Jarjisu Sa-Aadu, 2020. "The Independence of Central Banks, Political Institutional Quality and Financial Sector Development in Africa," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 19(2), pages 154-188, August.
    16. Bello K. Ajide, 2020. "Fragmentation and financial development in Sub-Saharan Africa Countries: the case of diversity debit versus diversity dividend theses," Economic Change and Restructuring, Springer, vol. 53(3), pages 379-428, August.
    17. Yuxiang, Karl & Chen, Zhongchang, 2011. "Resource abundance and financial development: Evidence from China," Resources Policy, Elsevier, vol. 36(1), pages 72-79, March.
    18. Kizito Uyi Ehigiamusoe & Hooi Hooi Lean & Chien-Chiang Lee, 2019. "Moderating effect of inflation on the finance–growth nexus: insights from West African countries," Empirical Economics, Springer, vol. 57(2), pages 399-422, August.
    19. Kim, Jounghyeon, 2021. "Financial development and remittances: The role of institutional quality in developing countries," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 386-407.
    20. Gregory W. Caskey & Nabamita Dutta, 2022. "Financial Development and Language Structures," Economies, MDPI, vol. 10(12), pages 1-16, December.

    More about this item

    Keywords

    Health conditions; Financial development; Fixed-effects; Generalized method of moments; Pooled-mean group;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I10 - Health, Education, and Welfare - - Health - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:114:y:2022:i:c:s0264999322001936. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.