11. Review of Literature Ahealthy person can not only work more effectively and efficiently but alsodevote more time to productive activities. This has make health to be one ofthe important aspects in economic development process, as healthy society willcontribute to the economic development of any nation.
Similarly, according to WHO(2000) “Health is a state or ability of individual to live a socially andeconomically productive life.” Healthcould be seen as physical and mental well-being of people which is measuredusing indicators such as life expectancy, adult mortality, child mortality rateand infant mortality as well as adult survival rate (Isaac and Michael, 2015).Bytreating health as a capital good in his model, Grossman (1972)argues that people are born with initial health endowments that depreciate overtime but can grow with investments in health Churchillet al (2015).”Grossman demonstrates that increase in health capital reduces the timelost to illness and thus, health allows a more effective performance thatincreases productivity.
” Also, Churchillet al (2015)ascertain that health can also affect growth indirectly when health statusaffects education performance. Good health can be associated with increasedlevel of schooling and high education performance. Wagstaff, as cited inAshiabi (2013) thetheory of demand for health views the individual as ‘demanding’ a commodity ‘health’.The theory is built on three basic economic concepts namely; the indifferencemap, the production function and the budget constraint.
The indifference map ofan individual is made up several indifference curves of that individual. Theindifference curve is a ‘welfare contour’ depicting a combination ofcommodities that gives the individual a certain level of utility (welfare).Under this theory, the individual views ‘health’ as a desirable commodity aswell as ‘other things in life’ (i.e. consumption) from which pleasure isderived (Ashiabi2013).A lot,of previous empirical studies based on time series or cross country data haveaimed to estimate the nature of the relationship between health expenditure andHealth outcomes. Early studies Newhouse (1977) raises thequestion what determines the quantity of resources any country devotes tomedical care.
The analysis provided suggests that per capita GDP of the countryis the single most important factor affecting Health expenditure. The studyfound a positive linear relationship between fractions of health careexpenditure to GDP. Results of New house were found to be consistent with anearlier study by Kleiman (1974) and both of these papers workedas a base for a large literature which viewed income as a major determinant ofhealth care expenditure.Azmat (2008) examine the relationship betweenthree measures of health outcomes such as infant mortality under-five mortalityrate and crude death rates and total per capita public health expenditure,using pooled time series – cross- section data for the seven pacific Islandcountries for the period 1990-2002. He use fixed and random effect model, theempirical results suggest that a 102 increase in per capita health expenditurewould lead to an approximate 6.6 percent reduction in infant mortality rate,equating to an average reduction of 2.0 infant deaths per 1000 live births forthe pacific Island countries. Similarly, the study provides strong evidencethat per capita health expenditure is important in determining health outcomes,with per capita incomes and immunization also featuring strongly.
Remanetal (2011)examined health expenditure in Nigeria; does the level of government spendingreally matter for the period 1980 to 2003, employing Cobb Douglas productionand ordinary least square method of analysis, they found that life expectancyand literacy rate were negatively corrected with health spending both in theshort and long run also, income elasticity of heath care expenditure was belowunit both in the short and long run which show that health care spending isincome in elastic and concluded that health is a necessary good in Nigeria?Moreover, some empirical evidence also emergedfrom India. For example, World Bank (2004) examines the impact of percapita GDP, per capita health expenditure and female literacy on infantmortality using Indian state level data over the period 1980 to 1999. The studyobserves that both per capita public spending on health and per capita GDP areinversely to infant mortality rate, but the results seems not be very robust toalternative specification of the model.Kumar (2015) investigate the relationshippublic expenditure on health and productivity for the time period 1960 to 2008,by using Granger causality test; he found that exist a significant and two wayrelationships between expenditure on health and economic growth in India.
Similarly, he point out that high health expenditure is a necessary criterionto raise productivity of an economy in long run, and also to ensure minimumlevel of health and health education as a fundamental right in India. Similarly,using annual time series data for the period 1974 – 75 to 1990-91 for 15 Indiastates, (Selvaraju and Reddy1994) the authors found that there isa strong relationship between per capita health expenditure and per capitaincome, also that the health care expenditure is elastic to changes in income.Fayissaand Train (2011) in their studyfor the 13 East European countries estimate a health production function, usingpanel data for the period 1997 to 2005, they employ panel analytic of fixedeffects, random effects, and Arellano-Bond estimator. The results of theirstudy indicate that economic growth as measured by GDP per capita growth, investmentin human capital formation, and residence in urban areas significantly reduceinfant mortality and thus improve the health status of these countries, whilethe GDP show the upward trend, this promises bright prospects in theimprovement of the health status of the region in general, and infantmortality, Also the results suggest that education plays a key role inimproving public health. Because Education can provide the necessary knowledgeto make wise decisions about issues that affect health. Kulkarni (2016) in his study he specifiesGrossman health production function model across five BRICS countries acrosssixteen years, he analyzes various socio-economic and environmental factors asinputs in the production of the health good.
