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Relationship between Health Expenditure and GDP in an Augmented Solow Growth Model for Pakistan: An Application of Co-integration and Error-Correction Modeling

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  • Aurangzeb

    ()
    (Research Officer at the Social Policy & Development Centre, (SPDC) Karachi, Pakistan.)

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    Abstract

    This paper examines the temporal interdependence between gross domestic product and health expenditure per capita for Pakistan in an augmented Solow growth model suggested by Mankiw, Romer and Weil (1992) for the period of 1973-2001. This paperis an extension of the MRW model by incorporating health capital proxied by health expenditure to the augmented Solow model. Moreover, an openness variable is also included in the model in order to capture the effect of technological changes on growth. The paper employs co-integration,ECM methodology and several diagnostic and specification tests. The empirical findings show a significant and positive relationship between GDP and Health Expenditure, both in the long- and short-run.

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    Article provided by Department of Economics, The Lahore School of Economics in its journal Lahore Journal of Economics.

    Volume (Year): 8 (2003)
    Issue (Month): 2 (Jul-Dec)
    Pages: 1-16

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    Handle: RePEc:lje:journl:v:8:y:2003:i:2:p:1-16

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    1. Gemmell, Norman, 1996. "Evaluating the Impacts of Human Capital Stocks and Accumulation on Economic Growth: Some New Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 9-28, February.
    2. Nancy Devlin & Paul Hansen, 2001. "Health care spending and economic output: Granger causality," Applied Economics Letters, Taylor & Francis Journals, vol. 8(8), pages 561-564.
    3. Hansen, Paul & King, Alan, 1996. "The determinants of health care expenditure: A cointegration approach," Journal of Health Economics, Elsevier, vol. 15(1), pages 127-137, February.
    4. Blomqvist, A.G. & Carter, R.A.L., 1993. "Is Health Care Really a Luxury?," UWO Department of Economics Working Papers 9311, University of Western Ontario, Department of Economics.
    5. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
    6. Caines, P. E. & Keng, C. W. & Sethi, S. P., 1981. "Causality analysis and multivariate Autoregressive modelling with an application to supermarket sales analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 3(1), pages 267-298, November.
    7. Hitiris, Theo & Posnett, John, 1992. "The determinants and effects of health expenditure in developed countries," Journal of Health Economics, Elsevier, vol. 11(2), pages 173-181, August.
    8. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    9. Rehana Siddiqui & Usman Afridi & Rashida Haq, 1995. "Determinants of Expenditure on Health in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 959-970.
    10. Miller, Stephen M. & Upadhyay, Mukti P., 2000. "The effects of openness, trade orientation, and human capital on total factor productivity," Journal of Development Economics, Elsevier, vol. 63(2), pages 399-423, December.
    11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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