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Health and growth: causality through education

Author

Listed:
  • 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.

Suggested Citation

  • Rui Huang & Lilyan E. Fulginiti & E. Wesley F. Peterson, 2010. "Health and growth: causality through education," China Agricultural Economic Review, Emerald Group Publishing, vol. 2(3), pages 321-344, September.
  • Handle: RePEc:eme:caerpp:v:2:y:2010:i:3:p:321-344
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    References listed on IDEAS

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    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. 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.
    3. Swanson, Charles E & Kopecky, Kenneth J, 1999. "Lifespan and Output," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 213-225, April.
    4. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, January.
    5. de la Croix, David & Licandro, Omar, 1999. "Life expectancy and endogenous growth," Economics Letters, Elsevier, vol. 65(2), pages 255-263, November.
    6. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
    7. Kalemli-Ozcan, Sebnem, 2002. "Does the Mortality Decline Promote Economic Growth?," Journal of Economic Growth, Springer, vol. 7(4), pages 411-439, December.
    8. Bloom, David E & Williamson, Jeffrey G, 1998. "Demographic Transitions and Economic Miracles in Emerging Asia," World Bank Economic Review, World Bank Group, vol. 12(3), pages 419-455, September.
    9. 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 541-563, July.
    10. 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.
    11. Bloom, David E. & Mahal, Ajay S., 1997. "Does the AIDS epidemic threaten economic growth?," Journal of Econometrics, Elsevier, vol. 77(1), pages 105-124, March.
    12. Desmond McCarthy & Holger Wolf & Yi Wu, 2000. "The Growth Costs of Malaria," NBER Working Papers 7541, National Bureau of Economic Research, Inc.
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    15. Alwyn Young, 2005. "The Gift of the Dying: The Tragedy of AIDS and the Welfare of Future African Generations," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 423-466.
    16. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
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    Cited by:

    1. Haruna Modibbo Usman & Mustapha Muktar & Nasiru Inuwa, 2015. "Health Outcomes and Economic Growth Nexus: Testing for Long Run Relationship and Causal Links in Nigeria," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(4), pages 176-183, April.

    More about this item

    Keywords

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

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I20 - Health, Education, and Welfare - - Education - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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