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Title:Has health capital formation cured Baumol's Disease? Panel Granger causality evidence for OECD countries PDF Logo
Authors:Hartwig, Jochen
Issue Date:2008
Series/Report no.:KOF working papers // Konjunkturforschungsstelle, Eidgenössische Technische Hochschule Zürich 206
Abstract:A large body of both theoretical and empirical literature has affirmed a positive impact of human capital accumulation in the form of health on economic growth. Yet Baumol (1967) has presented a model in which imbalances in productivity growth between a progressive (manufacturing) sector and a nonprogressive sector of the economy (of which health care forms an integral part) lead to perpetual expenditure shifts into the latter and, as a consequence, to a decline in overall GDP growth. Which of the two views has an empirical grounding is here tested by means of Granger causality analysis of a panel of 21 OECD countries. The results do not lend support to the hypothesis that health capital formation fosters economic growth in rich countries. They are more in line with the predictions of Baumol's model of unbalanced growth.
Subjects:Human capital
health expenditure
Baumol's (Cost) Disease
panel Granger causality tests
JEL:C12
C23
I10
O41
Persistent Identifier of the first edition:doi:10.3929/ethz-a-005666787
Document Type:Working Paper
Appears in Collections:KOF Working Papers, KOF Konjunkturforschungsstelle, ETH Zürich

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