Investigating the asymmetric effect of foreign direct investment and government health expenditure on population health in Iran

Document Type : RESEARCH PAPER

Authors

1 M.A. in Economics, University of Bojnord, Iran.

2 Assistant Professor of Economics, University of Bojnord, Iran.

3 Assistant Professor of Economics, University of Bojnord, Iran

4 PhD in Economics, Department of Economics, Bojnord University, Iran

Abstract

Improvement in human capital is considered as a critical catalyst to economic growth and development in the macroeconomic literature. Specifically, the neoclassical endogenous growth model posits that, growth in human capital impacts positively on output per worker in the long run. Hence, we have presented an empirical model to test the asymmetric effect of foreign direct investment and government health expenditure on population health in Iran using the non-linear autoregressive distributed lag (NARDL) model over the period of 1974-2021. The results of estimation of long-term coefficients for positive and negative changes in foreign direct investment and government health expenditure on population health showed that both long-term coefficients are asymmetric, positive and significant. At the same time, there is a positive and significant relationship between trade openness and population health in the long run. Also, the results showed that there is no significant relationship between the relevant variables and the health of the population in the short run.
Hence, we have presented an empirical model to test the asymmetric effect of foreign direct investment and government health expenditure on population health in Iran using the non-linear autoregressive distributed lag (NARDL) model over the period of 1974-2021. The results of estimation of long-term coefficients for positive and negative changes in foreign direct investment and government health expenditure on population health showed that both long-term coefficients are asymmetric, positive and significant. At the same time, there is a positive and significant relationship between trade openness and population health in the long run. Also, the results showed that there is no significant relationship between the relevant variables and the health of the population in the short run.
Extended abstract
Introduction
Foreign direct investment, as a key factor for globalization and technology diffusion, can play an important role in accelerating structural transformations and human capital accumulation. It is a general belief that economic growth leads to the improvement of human development; It means that foreign direct investment has a major impact on human development due to its relationship with economic development (Gökmenoğlu et al., 2018). Also, Kutluer (2021) believed that foreign direct investment can improve the health status of society when it can bring the effects of economic development such as improving income distribution, increasing the level of knowledge, reducing environmental problems, and increasing the social and cultural well-being of the labor. Government health expenditure is also considered an essential factor in improving health status and even resource distribution. Health expenditure is one of the important factors affecting economic growth and human development, which can, along with other factors, cause the development and improvement of labor performance. Therefore, this paper examines the effect of foreign direct investment and government health expenditures on the health of the population in Iran.
Theoretical Framework
Studies conducted in the past decades show conflicting evidence and views about the effects of foreign direct investment and government health expenditures on the health of the population.
Regarding foreign direct investment, Rodrik et al. (2004) and Kaulihowa & Adjasi (2019) believed that foreign direct investment affects the life expectancy of workers by expanding business opportunities and providing working conditions. Foreign direct investment increases people's income and purchasing power by creating job opportunities in the target country. As a result, their standard of living increases with the improvement of food quality and better health facilities, so foreign direct investment has a very close relationship with human health (Alsan et al., 2006). But Kutluer (2021) showed that the flow of foreign direct investment leads to a decrease in life expectancy. Kumari & Sharma (2018) found that foreign direct investment and GDP do not have a significant effect on population health.
Regarding government health expenditures, Nixon & Ulmann (2006), Anyanwu & Erhijakpor (2009), and Kamiya (2010), reported the positive impact of health expenditures on health outcomes. Kim & Lane (2013) showed that there is a positive relationship between public health expenditures and life expectancy. Musgrove (1996) and Fayissa & Gutema (2005) found that an increase in health expenditure has a robust negative effect on life expectancy at birth. Also, Sede & Ohemeng (2015) observed that the impact of government health expenditure on life expectancy is weak.
Methodology
Following Rahman et al. (2022) we have presented an empirical model to test the asymmetric effects of foreign direct investment and  government health expenditure on population health in Iran using the Non-Linear Autoregressive Distributed Lag (NARDL) model for 1974-2021.
Results & Discussion
The results of the estimation of long-term coefficients of positive and negative changes in foreign direct investment and government health expenditures on life expectancy showed that all long-term coefficients are asymmetric, positive, and significant. The results indicated that there is a positive and significant relationship between trade openness and life expectancy in the long term. Also, there is a positive and significant relationship between the positive changes in foreign direct investment and government health expenditures with life expectancy in the short term, but no significant relationship was seen for the negative changes of the mentioned variables with life expectancy.
Conclusions & Suggestions
The results showed that foreign direct investment and government health expenditures have a positive and significant effect on the health of the population in the long term. Foreign direct investment increases economic growth and leads to the allocation of more resources to education, health care, and infrastructure. Also, more public health services can increase life expectancy. Healthcare expenditure is an essential input for health production performance. Also, the openness of trade plays a significant role in improving national production and population health. In general, the health of the population is an important factor in increasing the productivity of a country, because healthy labor can make a significant contribution to the production and growth of national production. Therefore, the health of citizens is essential, and providing adequate health should be one of the primary goals of governments to achieve economic growth.

Keywords

Main Subjects

References

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