11. commodities that gives the individual a certain level

11. Review of Literature

A
healthy person can not only work more effectively and efficiently but also
devote more time to productive activities. This has make health to be one of
the important aspects in economic development process, as healthy society will
contribute to the economic development of any nation. Similarly, according to WHO
(2000) “Health is a state or ability of individual to live a socially and
economically productive life.”

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Health
could be seen as physical and mental well-being of people which is measured
using indicators such as life expectancy, adult mortality, child mortality rate
and infant mortality as well as adult survival rate (Isaac and Michael, 2015).

By
treating health as a capital good in his model, Grossman (1972)
argues that people are born with initial health endowments that depreciate over
time but can grow with investments in health Churchillet al (2015).
“Grossman demonstrates that increase in health capital reduces the time
lost to illness and thus, health allows a more effective performance that
increases productivity.” Also, Churchillet al (2015)
ascertain that health can also affect growth indirectly when health status
affects education performance. Good health can be associated with increased
level of schooling and high education performance.

 

Wagstaff, as cited inAshiabi (2013) the
theory of demand for health views the individual as ‘demanding’ a commodity ‘health’.
The theory is built on three basic economic concepts namely; the indifference
map, the production function and the budget constraint. The indifference map of
an individual is made up several indifference curves of that individual. The
indifference curve is a ‘welfare contour’ depicting a combination of
commodities that gives the individual a certain level of utility (welfare).
Under this theory, the individual views ‘health’ as a desirable commodity as
well as ‘other things in life’ (i.e. consumption) from which pleasure is
derived (Ashiabi2013).

A lot,
of previous empirical studies based on time series or cross country data have
aimed to estimate the nature of the relationship between health expenditure and
Health outcomes. Early studies Newhouse (1977) raises the
question what determines the quantity of resources any country devotes to
medical care. The analysis provided suggests that per capita GDP of the country
is the single most important factor affecting Health expenditure. The study
found a positive linear relationship between fractions of health care
expenditure to GDP. Results of New house were found to be consistent with an
earlier study by Kleiman (1974) and both of these papers worked
as a base for a large literature which viewed income as a major determinant of
health care expenditure.

Azmat (2008) examine the relationship between
three measures of health outcomes such as infant mortality under-five mortality
rate and crude death rates and total per capita public health expenditure,
using pooled time series – cross- section data for the seven pacific Island
countries for the period 1990-2002. He use fixed and random effect model, the
empirical results suggest that a 102 increase in per capita health expenditure
would 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 for
the pacific Island countries. Similarly, the study provides strong evidence
that per capita health expenditure is important in determining health outcomes,
with per capita incomes and immunization also featuring strongly.

Remanet
al (2011)
examined health expenditure in Nigeria; does the level of government spending
really matter for the period 1980 to 2003, employing Cobb Douglas production
and ordinary least square method of analysis, they found that life expectancy
and literacy rate were negatively corrected with health spending both in the
short and long run also, income elasticity of heath care expenditure was below
unit both in the short and long run which show that health care spending is
income in elastic and concluded that health is a necessary good in Nigeria?

Moreover, some empirical evidence also emerged
from India. For example, World Bank (2004) examines the impact of per
capita GDP, per capita health expenditure and female literacy on infant
mortality using Indian state level data over the period 1980 to 1999. The study
observes that both per capita public spending on health and per capita GDP are
inversely to infant mortality rate, but the results seems not be very robust to
alternative specification of the model.

Kumar (2015) investigate the relationship
public 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 way
relationships between expenditure on health and economic growth in India.
Similarly, he point out that high health expenditure is a necessary criterion
to raise productivity of an economy in long run, and also to ensure minimum
level 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 India
states, (Selvaraju and Reddy1994) the authors found that there is
a strong relationship between per capita health expenditure and per capita
income, also that the health care expenditure is elastic to changes in income.

Fayissaand Train (2011) in their study
for the 13 East European countries estimate a health production function, using
panel data for the period 1997 to 2005, they employ panel analytic of fixed
effects, random effects, and Arellano-Bond estimator. The results of their
study indicate that economic growth as measured by GDP per capita growth, investment
in human capital formation, and residence in urban areas significantly reduce
infant mortality and thus improve the health status of these countries, while
the GDP show the upward trend, this promises bright prospects in the
improvement of the health status of the region in general, and infant
mortality, Also the results suggest that education plays a key role in
improving public health. Because Education can provide the necessary knowledge
to make wise decisions about issues that affect health.

Kulkarni (2016) in his study he specifies
Grossman health production function model across five BRICS countries across
sixteen years, he analyzes various socio-economic and environmental factors as
inputs in the production of the health good.