key: cord-1016629-ya1h4kgl
authors: Alhassan, Gloria Nnadwa; Adedoyin, Festus Fatai; Bekun, Festus Victor; Agabo, Terhemen Justine
title: Does life expectancy, death rate and public health expenditure matter in sustaining economic growth under COVID‐19: Empirical evidence from Nigeria?
date: 2020-08-24
journal: J Public Aff
DOI: 10.1002/pa.2302
sha: f81dc78595763e87979a8816f6aef402b710947e
doc_id: 1016629
cord_uid: ya1h4kgl

The current health pandemic that has plagued the global of which the global south‐Nigeria is not insulated from is the premise for this empirical investigation. The present study relies on recent annual time‐series data to conceptualize the hypothesized claim via Pesaran's Autoregressive distributed lag techniques. Empirical findings from the bounds test traces the long‐run relationship between public health expenditure and economic growth over the study span. However, unlike previous studies, we introduce life expectancy and death rates in the model framework. Although health expenditure is not significant, empirical results show that a 1% increase in life expectancy and death rate increases and decreases economic growth by 3.85 and 1.84%, respectively. This suggests the need for Health Policymakers in Nigeria to implement active strategies that reduce the death rate, which is a blueprint for active engagement in the face of a global pandemic such as COVID‐19.

importance of good quality of life and its relationship with economic growth, and so the Nigerian government is encouraged to priorities building a healthy population (Yaqub et al., 2012) .

In late 2019 a virus caused a disaster in Wuhan, Hubei province China named "Novel Pneumonia Coronavirus Disease-2019 (COVID-19)" and was declared as a global pandemic Andersen, Rambaut, Lipkin, Holmes, & Garry, 2020 . The virus outbreak was disturbing due to its fastspreading ability and contagious, The world health organization daily record list for the virus cases keeps emerging globally, however, a decline was seen from China infected cases where it was first prominent as of when this article was drafted, meanwhile, a drastic increase in infected cases emerged in Europe, America, and Africa. Emergency action was taken by the WHO to protect human life due to the risk prevalent of the virus. The global pandemic of COVID-19 has increased mortality rate and beyond that, a severe diminish is seen on the global economy due to the decrease in production, consumption, unemployment, and decrease in quality of life. Even thou the global economic diminish seems unavoidable the governments are putting more effort to sustain the economic development during and after the pandemic. Fernandes (2020) .

Based on the highlighted position, the current study seeks to explore to what extent public health expenditure impede/engender sustainable economic growth for the case of global south-Nigeria. In a nutshell, the present study aims to find solution to the question?

Looking at the severe outbreak of (COVID-19), Will economic growth be sustainable or crash amidst the global health pandemic crises? This study aims to use Nigeria as a case study for the global south blocs for more insightful and policy constructions in the country and region at large to attain the "vision 2030" of the UN and much more the goal-3 of UNSDG's.

The remainder of this study is structured as: Section 2 presents the review of related literature. Section 3 renders the data and methodological sequences while empirical results and discussion. The conclusion and policy blueprint are highlighted in Section 5.

Various studies have been conducted for the past years similar to this by different scholars, aiming to draw the attention of government, public, and private sector to how health care, environment, and health status has a significant impact on economic growth and also to investigate if the government can establish sustainable growth in economic especially for the period of health crises. Piabuo and Tieguhong (2017) conducted an analytical research study on five African countries that achieved the MDGs goal from 2001 to 2013 and countries in the CEMAC sub-region. Econometric technics analysis was used which results indicate an increase in GDP per capita by 0.38 unit for five African countries that meet the target of allocating 15% of their government expenditure on health and 0.3unit for CEMAC, signifying that significant change in GDP per capital can only be prominent if there is a positive change in health expenditure. Ibikunle (2019) supported this, indicating a positive increase in GDP using the Ordinary Least Square (OLS) and the Granger causality test techniques to analyze the impact of health on economic growth, which was concluded that an increase in government expenditure on health should be considered so to achieve the goal of economic growth. On contrary to this, Olisakwe (2019) argued that an increase in budgetary allocation for health has negative outcomes on economic growth this was proven by extracting data from 1981 to 2017 in Nigeria using a classical linear regression technique to conduct the investigation. Nwani and Kelikume (2019) deducted the same conclusion as

Olisakwe (2019) 3 | DATA, MODEL, AND METHOD

This section presents the data, variables description and methodological procedures applied to address the hypothesized study claim for the case of Nigeria. 2 Subsequently the materials and method accordingly.

To carry out the empirical assessment necessary to achieve the aim of this study, we present a standard growth equation with labor, capital, trade and foreign direct investment as the required control variable.

However, as a novelty, we introduced three different measures for the health sector. First is the standard health expenditure as a percentage of GDP. Results from this are compared with other health sector proxies such as life expectancy and death rate. Given that COVID-19 has significantly influenced the death rate across many countries, the death rate and its impact on real GDP will provide valuable insights in times of pandemic such as this. Hence, our model is shown in the following equations below:

The autoregressive distributed lag model is used to estimate the models in Equations (1) Table 2 gives the descriptive statistics of the variables of interests employed in the study which includes mean value, SD, minimum and maximum. The total number of observations is pegged at 30. As shown in Table 2 Lastly, the table also presents the SD which explains the degree at which the data varies from their mean values.

To have a better understanding of the variables, Figure 1 shows the graphical illustrations of the trend of the variables of interest. As shown in Figure 1 , capital investment (CAP) is revealed to be the most fluctuating variable followed by the real GDP and health expenditure.

This implies the inconsistencies of the variables over time. Table 3 presents the results of the correlation analysis between the variables of interest. The result of the association between real GDP and health expenditure as well as life expectancy reveals that there is a strong and significant positive association that supports the theoretical construct in the literature while a strong and significant negative relationship is discovered between real GDP and death rate.

The association between real GDP and terms of trade as well as labor force is found to be strong, positive and significant, whereas, a weak and significant negative relationship is found between real GDP and foreign direct investment. Capital investment is shown to have a strong and significant negative relationship with real GDP.

We confirm the validity of the estimated model using analytical tests presented in Table 4 and Figure 2 . Subsequently, after exploring the summary statistics and correlation matrix, it is also imperative to examine the stationary properties of the variables of interest. GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or depletion and degradation of natural resources. Data are in constant 2010 U.S. dollars.

The World Bank CAP = capital investment as a percent of GDP Gross capital formation (formerly gross domestic investment) consists of outlays on additions to the fixed assets of the economy plus net changes in the level of inventories. Fixed assets include land improvements (fences, ditches, drains, and so on); plant, machinery, and equipment purchases; and the construction of roads, railways, and the like, including schools, offices, hospitals, private residential dwellings, and commercial and industrial buildings. Inventories are stocks of goods held by firms to meet temporary or unexpected fluctuations in production or sales, and "work in progress." According to the 1993 SNA, net acquisitions of valuables are also considered capital formation.

The World Bank LAB = labor force, million people Labor force comprises people ages 15 and older who supply labor for the production of goods and services during a specified period. It includes people who are currently employed and people who are unemployed but seeking work as well as first-time jobseekers. Not everyone who works is included, however. Unpaid workers, family workers, and students are often omitted, and some countries do not count members of the armed forces. Labor force size tends to vary during the year as seasonal workers enter and leave.

The World Bank TOT = terms of trade, base year = 2000 Net barter terms of trade index is calculated as the percentage ratio of the export unit value indexes to the import unit value indexes, measured relative to the base year 2000. Unit value indexes are based on data reported by countries that demonstrate consistency under UNCTAD quality controls, supplemented by UNCTAD's estimates using the previous year's trade values at the standard international trade classification three-digit level as weights. To improve data coverage, especially for the latest periods, UNCTAD constructs a set of average prices indexes at the three-digit product classification of the standard international trade classification revision 3 using UNCTAD's commodity Price statistics, internaχtional and national sources, and UNCTAD secretariat estimates and calculates unit value indexes at the country level using the current year's trade values as weights.

The United Nations FDI = foreign direct investment, percent of GDP Foreign direct investment is the net inflows of investment to acquire a lasting management interest (10% or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. This series shows net inflows (new investment inflows less disinvestment) in the reporting economy from foreign investors and is divided by GDP. 

After conducting the tests for the unit roots, the next step is to examine if at all there is the existence of long run equilibrium between the variables. Therefore, ARDL bound test technique coined by Pesaran et al (2001) is employed in this current study to test for cointegration as shown in Table 6 . The results of ARDL bound test approach shows that, in most cases, the F-statistics is valued above at least the 10% upper bound which is an avenue to establish long run equilibrium between the variables of interest.

Since the ARDL bound test approach has confirmed that that the variables of interest to this study are cointegrated, the long run and short-run equilibrium can then be estimated. Table 7 shows the empirical findings of the short run and long run equilibrium nexus using the ARDL modeling approach and the analysis covers three models with real GDP as the sole dependent variable. Accordingly, the result of the impact of health expenditure on real GDP is found to be negative and insignificant both in the short run and the long run.

Specifically, a 1% increase in health expenditure will lead to an including Nigeria. This implies that more capital accumulation tends to cause the Nigerian economy to experience a downturn due to ways through which the capital is channeled. The results obtained from the analysis also indicate that labor force across the three models has negative but insignificant impact on health expenditure both in short run and long run in such a way that a 1% increase in results 28.26% reduction in GDP for the first model. Meanwhile, the results of analyses modeled for life expectancy and death rate reveal a negative and significant effect of labor force on GDP both in the short run and long run such that a percent increase in labor force will reduce the GDP by 7.05 and 9.04%, respectively in the short run and by 8.58 and 10.83%, respectively in the long run. This implies that labor force has neutrally disrupted the advancement of the economy of Nigeria. While Table 7 indicates that all the tests carried out in the study are well behaved and align with expectations attached to the estimated results, the stability of the estimated model is also confirmed with Figure 2 that presents the CUSUM and CUSUMSQ plotted within 95% degree of confidence. Therefore, there is a possibility of making unbiased statistical derivations, interpretations and policy recommendations.

The presence of cointegration between the variables of interest has provided the evidence for the existence of at least one causality nexus between the variables though could not provide the direction of the causality. Thus, we employ the popular Granger causality test in this study to examine which variable serves as a causative agent to the other. The Granger causality test results are presented in Table 8 .

Empirical evidence shows that, there exists a one-way directional relationship moving from the health expenditure to productivity growth while no causal relationship is found between economic growth and life expectancy and also between economic growth and death rate.

The empirical results obtained from the causality tests reveal the validity of feedback hypothesis such that bi-directional causal relationship is discovered between economic growth and capital investment, unidirectional relationship separately running from labor force and terms of trade to economic growth. Meanwhile, no causality is F I G U R E 2 Recursive cusum discovered between foreign direct investment (FDI) and productivity growth.

Efforts to compare the results of the current study to the previous show that one-way directional causal relationship exists moving from expenditure on healthcare to productivity growth found in this current study is contrary to the empirical study of Dincer, Hacioglu, and Yüksel (2018) and Mehrara and Musai (2011) who also found a one-way directional causal relationship running from economic growth to health expenditure for E7 countries and Iran respectively.

Another conflicting result is that of Ecevit (2013) who found a oneway directional causal relationship moving from life expectancy to productivity growth. The expected empirical result is found for the impact of death rate on economic growth and of which is negative and significant.

Regarding the causality test, no causal relationship is found between economic growths between death rate as duly expected theoretically.

This result suggests that if death rate becomes consistent in the country, it could hinder the economic growth and development of the country through labor force channel.

From the findings stated above, it is therefore recommended that the Nigerian government to prioritize investment in human capital development through the provision of healthcare facilities, personnel training, monitoring and evaluation, and making the access to the healthcare facilities affordable. Embarking on these will not only assure the provision of the quality labor force but also translate to an increase in the productive capacity of the country and an increase in economic growth.

Furthermore, since it is clear that the health sector in Nigeria is underfunded and underdeveloped, this is a call on the government to increase the investment in the health sector in the country and such investments should be directed towards fighting off leading deathcausing diseases such as tuberculosis, pneumonia and influenza that tend to cut the life expectancy in the country short.

Lastly, the Nigerian government should strongly consider the provision of an economically friendly environment as well as a secured Note: *, **, and *** represent significance at 10, 5, and 1%, respectively.

Gloria Nnadwa Alhassan is currently a Ph.D. student at the fac- 

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