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Health and growth: causality through education

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Author Info

  • Rui Huang
  • Lilyan E. Fulginiti
  • E. Wesley F. Peterson

Abstract

Purpose – The paper aims to theoretically and empirically investigate the impact on human capital investment decisions and income growth of lowered life expectancy as a result of HIV/AIDS and other diseases. Design/methodology/approach – The theoretical model is a three-period overlapping generations model where individuals go through three stages in their lives, namely, young, adult, and old. The model extends existing theoretical models by allowing the probability of premature death to differ for individuals at different life stages, and by allowing for stochastic technological advances. The empirical investigation focuses on the effect of HIV/AIDS on life expectancy and on the role of health in educational investments and growth. Potential endogeneity is addressed by using various strategies, such as controlling for country-specific time-invariant unobservables and by using the male-circumcision rate as an instrumental variable for HIV/AIDS prevalence. Findings – The paper shows theoretically that an increased probability of premature death leads to less investment in human capital, and consequently slower growth. Empirically, the paper finds that HIV/AIDS has resulted in a substantial decline in life expectancy in African countries and these falling life expectancies are indeed associated with lower educational attainment and slower economic growth world wide. Originality/value – The theoretical and empirical findings reveal a causal link flowing from health to growth, which has been largely overlooked by the existing literature. The main implication is that health investments that decrease the incidence of diseases like HIV/AIDS resulting in increases in life expectancy through their complementarity with human capital investments lead to long run growth.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal China Agricultural Economic Review.

Volume (Year): 2 (2010)
Issue (Month): 3 (September)
Pages: 321-344

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Handle: RePEc:eme:caerpp:v:2:y:2010:i:3:p:321-344

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Related research

Keywords: Acquired immune deficiency syndrome; Africa; Economic growth; HIV; Human capital; Life expectancy;

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References

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  1. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  2. David E. Bloom & Ajay S. Mahal, 1995. "Does the AIDS Epidemic Really Threaten Economic Growth?," NBER Working Papers 5148, National Bureau of Economic Research, Inc.
  3. McDonald, Scott & Roberts, Jennifer, 2006. "AIDS and economic growth: A human capital approach," Journal of Development Economics, Elsevier, vol. 80(1), pages 228-250, June.
  4. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
  5. David E. Bloom & David Canning, 2004. "The Health and Wealth of Africa," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 5(2), pages 57-81, April.
  6. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
  7. Daron Acemoglu & Simon Johnson, 2007. "Disease and Development: The Effect of Life Expectancy on Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 925-985, December.
  8. David E. Bloom & Jeffrey G. Williamson, 1997. "Demographic Transitions and Economic Miracles in Emerging Asia," NBER Working Papers 6268, National Bureau of Economic Research, Inc.
  9. de la Croix, David & Licandro, Omar, 1997. "Life expectancy and endogenous growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997029, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  10. Kalemli-Ozcan, Sebnem, 2002. " Does the Mortality Decline Promote Economic Growth?," Journal of Economic Growth, Springer, vol. 7(4), pages 411-39, December.
  11. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  12. Swanson, Charles E & Kopecky, Kenneth J, 1999. "Lifespan and Output," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 213-25, April.
  13. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
  14. Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
  15. Clive Bell & Shantayanan Devarajan & Hans Gersbach, 2006. "The Long-Run Economic Costs of aids: A Model with an Application to South Africa," World Bank Economic Review, World Bank Group, vol. 20(1), pages 55-89.
  16. Alwyn Young, 2005. "The Gift of the Dying: The Tragedy of Aids and the Welfare of Future African Generations," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 423-466, May.
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