ABSTRACT:
The paper investigates the importance of life expectancy at birth as a proxy for health capital on labor productivity in selected ASEAN countries over the period 1960 to 2015. We proposed a unified model to exam both direct and indirect impacts of health capital. The results indicate that the growth of productivity in mid-term has experienced a slowdown trend over the period that is the main obstacle to those countries to reach higher income in the long run especially for low mid-income economies such as Vietnam and Indonesia. Additionally, we find that health capital exhibits a positive and significant result until interaction terms are added. It also positively and significantly accelerates the effects of both trade openness and FDI on labor productivity. It is implied that the impacts of trade openness and FDI on productivity significantly depend on levels of existing health capital.
Keywords: Health capital, life expectancy at birth, productivity, openness.
1. Motivation
High labor quality, a crucial element in almost every economy, is based on the interrelated factors of human capital and long-term economic growth. However, most of the empirical studies identify education represents to human capital and ignores the importance of health capital. Heathier labor also significantly contributes to economic development through higher productivity and longer hour works especially for those countries with the earlier stage of development. Investment in healthcare systems is important for expanding life expectancy at birth and that leads to higher productivity and a higher quantity of production. Although the large series works of Barro (1996), Bloom, Canning and Sevilla (2001, 2004 and 2005) strongly suggested that health considers as an important factor to foster economic growth, the different effects of existing levels of health capital and openness on labor productivity are still unsolved. Therefore, the aim of this study is to investigate the importance of life expectancy at birth as a proxy for health capital and openness on labor productivity.
The investigation is based on Southeast Asian economies, which have been examined by various economists most particularly due to their remarkably high growth rate of about 6.5 percent per year experienced in recent years, which contributes more than half of the worlds growth (ADB, 2016). The high growth can be largely attributed to economic integration with capital flow and openness as the main factors leading to an acceleration of economic growth. However, it is predicted that potential growth would slow down by nearly 2 percent due to the global financial crisis and structural reforms. The downtrend of the productivity growth rate in these countries is a potential problem for reaching higher economic development and avoiding a middle-income trap. Its prime purpose is to illustrate the effect of health capital and openness on labor productivity in those economies and to investigate whether the existing level of health capital will accelerate the effect of openness and attract capital inflows on labor productivity.
2. Methodology
For reasons of data availability, the study relies on the
evidence and calculated data from the Conference Board Total Economy Dataset,
the World Banks World Development Indicators, ADB Bank and United Nations in
South-East Asia from 1960 to 2015. Additionally, to assess empirically the
effects of health capital, the paper uses life expectancy at birth is the
number of years that a newborn baby would be expected to live, which is also
consistent in both principle and practice with many different possible formulas
(Weil, 2014). Arora (2001) indicated that life expectancy variables included
nearly all age groups of the population and strongly impacted on health
capital, thus it was considered to be a proxy for health capital. The higher
proportion of income allocated for health expenditure leads to increases in
labor productivity (Mayer, 2001b) and (Arora, 2001). The estimating equations
take the following basic formulations that are specified for country i at time t.
In which, labour productivity as the ratio of Real GDP to total hour worked, H denotes Health capital as life expectancy at birth, Trade represents Levels of trade openness and using the most popular indicator as the ratio of export plus import to GDP, Pop equals to population growth rate, FDI equals to Foreign direct investment, Logarea is Logarit of land area in square kilometers, Interest is Interest Rates percent per annum; period averages 12 months, Urban is Urban population of total, Gov represents Account balance, and Infras is Infrastructure as mobile cellular subscriptions (per 100 people).
Before estimating the effects of health capital to avoid spurious results, we examine that all of the variables are stationary based on the Dickey-Fuller1 unit root test with the trend in the panel data and selected countries. The null hypothesis of Dickey-Fuller is that all panels contain unit roots. The results indicated that most of the variables are non-stationary. However, after taking the first differences they will become stationary, excepting for the urbanisation data, which needed to be taken to the second differences to become stationary data. Additionally, the Hausman test is used to choose between fixed effects and random effect equations.
3. Empirical results
3.1 The down trend of labour productivity growth rate in selected economies
In medium-term labour hours worked (productivity) growth,
the dynamic GDP growth in the 10 year moving average commonly denoted by
10-YMA2 is the reliable indicator that can be used to assess the economic
trends in medium-term economic growth. The Philippines has experienced a
gradual increase in its 10-YMA productivity growth, while the others have seen
decreases during the period of 16 years since 2000, excepting an unchanged
trend in recent years in Indonesia.
Furthermore, the 10 year moving average productivity growth among ASEAN-5 countries tends to converge overtime and they are identical in 2016. More importantly, in high-income countries, the growth rate of productivity gradually decreased and that follows the economic theory of convergence effects and the catch-up3 effects. However, this trend also appeared in Vietnam or even as a stable trend in recent years in Indonesia, where they still belong to low mid-income countries that will find obstacles to the level of economic development.
3.2. Econometric analysis of health capital and openness on labor productivity
The empirical results are reported in Table 1. The table presents the effects of health on the change in labour hours worked (productivity) in ASEAN-5 selected countries through international economic integration. Overall, health capital only significantly impacts on productivity when it combines with trade and financial openness. Nearly 50 per cent of the variability of the change in productivity is explained by 12 variables in almost all the five equations.
In column 1 health capital, financial openness, trade openness, population growth, urbanization, land area and inflation rate explained just over 46 per cent the variation of the change in productivity. Among them, merely having financial openness significantly impacts improvements in productivity at the 1 per cent level of significance. Despite positive impacts of health capital and trade openness, their coefficients are still insignificant. Adding interaction terms between health and openness, the equation in column 2, explained nearly 60 per cent of the variation of productivity. Surprisingly, higher productivity changes positively depend on the expansion of life expectancy at birth and indirect impacts of it occur through financial and trade openness. Specifically, increasing life expectancy at birth by one year leads to a rise of 0.658 labour hours worked in productivity at the 10 per cent level of significance. Health capital also accelerates the impacts of trade and financial openness at the 1 per cent level of significance on productivity. In contrast, the coefficients of trade openness and financial inflows become negative and significant at 1 per cent and 5 per cent level of significance respectively and the magnitude of the coefficients is higher than the interaction terms. Also, when government size, infrastructure, and the interest rate are added to the model (column 4 and 5), it is found that they do not significantly impact on enhancing productivity, even though the variation of labour hours worked (productivity) increases. The paper found that the effects of health on productivity in this study are not fully consistent with theoretical arguments at the microeconomic level. While our research found insignificant or even positive impacts of health capital, Bloom, Canning & Sevilla (2004) claimed that health had a positive and statistically significant impact on economic performance through the improvement of labour productivity. The paper focuses on the direct effect of life expectancy at birth as a proxy for health capital on labour hours worked (productivity) and the indirect effects of it through openness variables. However, according to Lee, Mason & Miller (2000) lifecycle health capital might also impact on lifecycle savings and capital accumulation and the return investment in education (Bils & Klenow, 2000). Therefore, improvements in health might increase economic performance through the accumulation of capital. The roles of health capital also accelerate the exports in all countries. The major reason for this is that healthier labour strongly associates with lower illness, higher productivity, longer working hours and fewer working absences, which is the main driver improving the quantity of production (Arora, 2001). They also suggested that longer working hours are essential for fostering economic development, especially for countries in the earlier stages of development.
4. Concluding remarks
The paper investigates the effects of life expectancy as proxies for health capital on labor productivity in ASEAN countries over the period from 1950 to 2015. The empirical results indicate that slower productivity growth of low-mid income economies is the major obstacle to those countries to reach the higher level of economic development in long-run, especially for low mid-income economies. Based on cross-country regression, the paper indicates that health capital exhibits a positive and significant result until interaction terms are added. Other variables exhibit an insignificant impact on productivity. It is noted that health capital positively and significantly accelerates the effects of both trade openness and financial openness on productivity. The research also was limited by its restriction to just ASEAN- 5 countries, as well as the data of these countries. In some countries, the data was more limited data and that resulted in less consistent estimates. However, the paper tested the relatively small sample using robust standard errors and the results might be considered reasonable. Therefore, future studies could expand the panel data that would not only support obtaining more consistent estimates but also give results comparing the more industrialized countries, for instance, the USA or Europe.
ENDNOTES:
1 The Augmented Dicky-Fuller (ADF) test is based on the following regression: ∆Yt = β1+ β2t + δYt-1 + ∑ti=1∆Yt-1 + εi
2 10-year moving average of real GDP growth rate in the year t g10-YMA is calculated by gt(10-YMA) = (gt-9 + ... + gt-1 + gt/10), where gt-k equal to real GDP growth rate in year t-k
3 Mankiw (2001) indicated that the catch-up effect is the property whereby countries that begin poor tend to grow more rapidly than countries that are already rich.
REFERENCES:
1. Asian Development Outlook (ADO) 2016: Asia's Potential Growth, Asian Bank
https://www.adb.org/publications/asian-development- outlook-2016- asia-potential-growth
2. Arora, S. (2001). Health, human productivity, and long-term economic growth. Journal of Economic History, 61(03), 699 - 749.
3. Barro, R. (1996). Health and economic growth. World Health Organization, Geneve.
4. Bloom, D. E., Canning, D., & Sevilla, J. (2001). The Effect of Health on Economic Growth: Theory and Evidence. Cambridge: National Bureau of Economic Research.
5. Bloom, D. E., Canning, D., & Sevilla, J. (2004). The effect of health on economic growth: A production function approach. World Development, 32(1), 1 - 13.
6. Bloom, D. E., Canning, D., & Sevilla, J. (2005). Health and economic growth: Reconciling the micro and macro evidence. Center on Democracy, Development and the Rule of Law Working Papers, 42.
7. Bils, M., & Klenow, P. J. (2000). Does schooling cause growth?.American Economic Review, 1160 - 1183.
8. Lee, R., Mason, A., & Miller, T. (2000). Life cycle saving and the demographic transition: The case of Taiwan.Population and Development Review,26, 194 - 219
9. Mankiw, N. G. (2001) Principles of Economics, 2nd, Harcourt Brace & Company, Orlando, FL.
10. Mayer, D. (2001b). The long-term impact of health on economic growth in Mexico, 1950 – 1995. Journal of International Development, 13(1), 123 - .
11. Weil, D. N. (2014). Health and economic growth. Handbook of Economic Growth, 2, 623 - 682.
PHÂN TÍCH TÁC ĐỘNG CỦA NGUỒN VỐN SỨC KHỎE ĐẾN NĂNG SUẤT LAO ĐỘNG:
NGHIÊN CỨU ĐƯỢC THỰC HIỆN TỪ CÁC QUỐC GIA ASEAN
● TRẦN VĂN NGUYỆN
Khoa Kinh tế, Trường Đại học Kinh tế và Quản trị kinh doanh
Đại học Thái nguyên
TÓM TẮT:
Bài viết này đánh giá tác động của tuổi thọ bình quân là chỉ tiêu đại diện cho nguồn vốn về sức khỏe đến năng suất lao động ở các quốc gia ASEAN trong giai đoạn từ năm 1960 đến năm 2015. Nghiên cứu sử dụng mô hình kinh tế để đo lường tác động trực tiếp và gián tiếp của tuổi thọ bình quân. Nghiên cứu chỉ ra rằng, tăng trưởng bình quân trong trung hạn của năng suất lao động có xu hướng giảm dần, điều này là một trong những trở ngại đến các quốc gia này để đặt được mức thu nhập cao hơn trong dài hạn, đặc biệt là các quốc gia có thu nhập trung bình thấp như Việt Nam và Indonesia. Hơn nữa, kết quả nghiên cứu chỉ ra rằng nguồn vốn về sức khỏe tác động cùng chiều và có ý nghĩa thống kê khi trong mô hình bổ sung các biến tương tác. Quan trọng hơn, nghiên cứu cho thấy nguồn vốn về sức khỏe có ý nghĩa lớn trong việc thúc đẩy tác động của thương mại và đầu tư trực tiếp nước ngoài đến việc nâng cao năng suất lao động. Hay tác động của thương mại và đầu tư trực tiếp nước ngoài đến năng suất lao động phụ thuộc lớn vào tuổi thọ bình quân hiện tại.
Từ khóa: Nguồn vốn sức khỏe, mở rộng thương mại, năng suất lao động, tuổi thọ bình quân.
Xem tất cả ấn phẩm Các kết quả nghiên cứu khoa học và ứng dụng công nghệ số 11 tháng 10/2017 tại đây
