EMPIRICAL STUDY ON THE INTERACTIVE EFFECT OF HEALTH EXPENDITURE AND LABOR ON ECONOMIC PERFORMANCE IN THE UNITED STATES (1960 – 2022) – International Journal of Social Sciences and Management Review

EMPIRICAL STUDY ON THE INTERACTIVE EFFECT OF HEALTH EXPENDITURE AND LABOR ON ECONOMIC PERFORMANCE IN THE UNITED STATES (1960 – 2022)

Authors: Oluwaseyi Rachael Hinmikaiye*, Omotolani Eniola Akinbolajo, Olajumoke Deborah Akanbi & Owolabi Williams Adeyemi,

ABSTRACT

This paper has investigated the effect of the interconnection between health expenditure and labor supply in relation to the economic performance in the United States. Descriptive research design was adopted, while annual time series secondary data for the period 1960-2022 were obtained from the World Development Indicators (WDIs, 2024). Short run and long run analyses were carried out using the Autoregressive distributed lag (ARDL), while a robustness check for the long run relationship was carried out using the Fully Modified Ordinary Least Squares (FMOLS). Findings from the study revealed that the interactive variable of health expenditure and labor has positive and significant impact on real output in manner that a percentage increase in the interactive variable will enhance economic performance by 0.51 percent (t = 5.52, p < 0.01) and 0.59 percent (t = 3.35, p < 0.01) increase economic performance in the short run and the long run, respectively. The same results were affirmed by the robustness check conducted using the FMOLS, where a percentage increase in the interactive health and labor variable will bring about 0.76 percent (t = 11.79, p< 0.01) increase in the US economic growth. However, labor supply was found to exert negative effects on economic performance when it is unaided by any growth enabling factor. Specifically, percentage increase in labor will reduce economic output by 0.76 percent (t = -1.94, p < 0.10) in the short run and by 1.68 percent (t = -1.73, p < 0.10) in the long run. This study found health expenditure-augmented labor more productive to economic growth. The study recommends that policy makers focus more on making strategic policies that will channel health spending towards enhancing labor productivity.

Keywords: Health Expenditure, Economic Growth, Interactive Variable, Economic Performance, Labor productivity.

REFERENCES

Aboubacar, B. and Xu, D. (2017) The Impact of Health Expenditure on the Economic Growth in Sub-Saharan Africa. Theoretical Economics Letters, 7, 615-622. doi: 10.4236/tel.2017.73046.
Bagadeem, S. A., & Ahmad, M. U. (2020). Healthcare Expenditure and Economic Growth: How Important Is the Partnership? Research in World Economy Vol. 11, No. 5; Special Issue, 2020
Barro, R. (1996). Three Models of Health and Economic Growth. Unpublished manuscript. Cambridge, MA: Harvard University.
Bedir, S. (2016). Healthcare Expenditure and Economic Growth in Developing Countries. Advances in Economics and Business 4(2): 76-86, 2016 DOI: 10.13189/aeb.2016.040202
Beylik U, Cirakli U, Cetin M, Ecevit E and Senol O (2022) The relationship between health expenditure indicators and economic growth in OECD countries: A Driscoll-Kraay approach. Front. Public Health 10:1050550. doi: 10.3389/fpubh.2022.1050550
Bukenya, James (2009). Do fluctuations in health expenditure affect economic growth?, The Open Economics Journal, ISSN 1874-9194h, Bentham Open, Sharjah, Vol. 2, pp. 31-38, https://doi.org/10.2174/1874919400902010031
Esen, E., & Keçili, M. C. (2021). Economic Growth and Health Expenditure Analysis for Turkey: Evidence from Time Series. Journal of the Knowledge Economy (2022) 13:1786–1800. https://doi.org/10.1007/s13132-021-00789-8
Erçelik, G. (2018). The Relationship between Health Expenditure and Economic Growth in Turkey from 1980 to 2015. Journal of Politics, Economy and Management, 1(1), 1–8
Khot, S. (2020). Interaction Effect in Multiple Regression. Towards Data Science. https://towardsdatascience.com/interaction-effect-in-multiple-regression-3091a5cd0fadd.
Kurt, S. (2015). Government Health Expenditures and Economic Growth: A Feder–Ram Approach for the Case of Turkey. International Journal of Economics and Financial Issues, 2015, 5(2), 441-447.
Lopreite, M., & Zhu, Z. (2020). The effects of ageing population on health expenditure and economic growth in China: A Bayesian-VAR approach. Social Science & Medicine, https://doi.org/10.1016/j.socscimed.2020.113513
Mohsen Mehrara, Maysam Musai (2011). Health Expenditure and Economic growth: An ARDL Approach for the Case of Iran. Journal of Economics and Behavioral Studies Vol. 3, No. 4, pp. 249-256, Oct 2011 (ISSN: 2220-6140)
Mushkin, S. (1962), “Health as an investment,” Journal of Political Economy, 70, 129-157 Ndaguba, E. A., & Hlotywa, A. (2021). Public health expenditure and economic development: The case of South Africa between 1996 and 2016. Cogent Economics & Finance, 9:1, 1905932, DOI: 10.1080/23322039.2021.1905932
Ogundipe, M.A., & Lawal, N. A. (2011). Health Expenditure and Nigerian Economic Growth. European Journal of Economics, Finance and Administrative Sciences. ISSN 1450-2275 Issue 30.
Ojo, T.J., & Ojo, S.I. (2022). Health Expenditure, Education and Economic Growth in Nigeria. Open Journal of Social Science and Humanities. Volume: 3; Issue: 1, Pages: 01-17 (2022). DOI: 10.52417/ojssh.v3i1.308
Olayiwola, S. O., Bakare-Aremu, T. A., & Abiodun, S. O. (2021). Public Health Expenditure and Economic Growth in Nigeria: Testing of Wagner’s Hypothesis. AJER, Volume IX, Issue II,
Ozturk, O., & Topcu, E. (2014). Health Expenditures and Economic Growth: Evidence from G8 Countries. International Journal of Economics and Empirical Research. 2(6), 256-261
Penghui, Xu; Xicang, Z.; Haili, Li (2022). Direct and indirect effects of health expenditure on economic growth in China. EMHJ – Vol. 28 No. 3
Piabuo, S. M. &Tieguhong, J. C. (2017). Health expenditure and economic growth – a review of the literature and an analysis between the economic community for central African states (CEMAC) and selected African countries. Piabuo and Tieguhong Health Economics Review (2017) 7:23. DOI 10.1186/s13561-017-0159-1
Preston, S. (1975), “The Changing Relation between Mortality and Level of Economic Development,” Population Studies, 29, 231–48.
Qehaja, S. S., Qehaja, D., Hoti, A., & Marovci, E. (2022. The relationship between government health expenditure and economic growth: Evidence from western Balkan countries. International Journal of Applied Economics, Finance and Accounting ISSN 2577-767X
Raghupathi V and Raghupathi W (2020) Healthcare Expenditure and Economic Performance: Insights From the United States Data. Front. Public Health 8:156. doi: 10.3389/fpubh.2020.00156 Vol. 15, No. 1, pp. 10-20. DOI: 10.33094/ijaefa.v15i1.724
Safdari, M., MehriziM. A. & Elahi, M. (2013). The effect of health expenditure on economic growth in Iran. African Journal of Business Management. Vol. 7(38), pp. 3972-3976, 14 October, 2013 DOI: 10.5897/AJBM11.1552
Zhang, X., Gang, Z., & Dong, X. (2020). Effects of Government Healthcare Expenditure on Economic Growth Based on Spatial Durbin Model: Evidence from China. Iran J Public Health, Vol. 49, No.2, Feb 2020, pp.283-293