The Relative and Dynamic Effects of Health and Education on Economic Growth in Selected African Countries

Abstract

This paper develops an integrated framework of human capital and growth to investigate the role of the two major components of human capital, health and education on growth for a set of selected African countries⁴ from 1980-2008. Our analysis and results show that both components of human capital, health and education play a positive role in promoting the effectiveness of labour and in influencing growth. The analysis also features the role of the physical capital stock, which is found to have a significant positive impact on health, education and growth. Dynamic simulation results reveal that, in the long run, temporary and permanent positive shocks to health and education impact positively on labour effectiveness and growth. Increasing education and health on a permanent basis by 1% leads to on average, a permanent sustained increase in output of 1.2% and 0.8%, respectively. For some countries, the permanent shock to health and education raises output by 1.2% in both cases, indicating presence of increasing returns to scale from health and education on output growth. Similar findings are obtained with the human capital index which constitutes health and education mainly to capture possible interactions between health and education. We conclude that it is crucial for policies geared at improving human capital to be cross cutting and should be two-thronged in approach targeting health and education to realize sustained positive growth effects through productivity enhancements emanating from better health and education.

Keywords: Human Capital, Health, Education, Growth, Dynamic Simulations and African countries

BOJE: Botswana Journal of Economics, vol 9(13) 2012