Has Health Capital Formation Cured 'Baumol’s Disease'? – Panel Granger Causality Evidence for OECD Countries
Open access
Author
Date
2008-09Type
- Working Paper
ETH Bibliography
yes
Altmetrics
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. Show more
Permanent link
https://doi.org/10.3929/ethz-a-005666787Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
Human capital; health expenditure; ECONOMIC GROWTH; GESUNDHEIT + HYGIENE; HEALTH + HYGIENE; WIRTSCHAFTSWACHSTUM; Panel Granger causality test; 'Baumol's (Cost) Disease'Organisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
More
Show all metadata
ETH Bibliography
yes
Altmetrics