Identifying the Relationship Between Health Investment and Economic Development: A Cluster Analysis for Developing, Developed, and Least Developed Countries

Identifying the Relationship Between Health Investment and Economic Development: A Cluster Analysis for Developing, Developed, and Least Developed Countries

Serkan Eti, Yaşar Gökalp, Nurcan Okçuoğlu Tosun
DOI: 10.4018/978-1-7998-2329-2.ch001
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The purpose of this study is to reveal the relationship between the economic development of countries and the importance they attach to health. In this context, macroeconomic data on the economic development levels and health of 127 countries were included in the study. In the application part of the study, clustering and cross-table analysis were used. As a result of the k-means clustering analysis, a 76.4% similarity was found between the three countries groups and the economic development levels. Therefore, it is possible to talk about significant relationships between health expenditures/investments and economic development. In addition, it is seen that 90% of the country group that attaches importance to health expenditures consists of developed countries.
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Economic growth is an extremely important variable for the success of a country's economy. It is an indispensable element of the economic policies of many countries, especially developed countries. The phenomenon of economic growth is one of the most debated issues of economists in all periods. Today, it is one of the most important social and economic issues that least developed, developing and even developed countries have emphasized. It is expressed as economic growth that a country widening its production limit by increasing the amount of scarce resources or improving their quality or reaching higher production levels by changing production technology and institutional framework (Üstünel, 1988). The increase in the national income of the countries is an important indicator in terms of economic growth. When the literature is analyzed, GDP (Gross Domestic Product) has been used in the national income calculations since the beginning of 1990s instead of GNP (Gross National Product) in order to measure economic growth (Ertek, 2017; Murat & Yılmaz-Eser, 2013; Ersin and Eti, 2017). While developed countries attach importance to economic growth, in other words, the change in real GDP over the years, developing countries give more importance to the concept of economic development than to the concept of economic growth. Economic development encompasses economic as well as social and political spheres such as economic growth, reduction of income imbalances and unemployment, and the modernization of economic and social institutions (Dinçer et al., 2018a, 2018b, 2018c; Özel, 2012). The differences in the growth rates of the countries have made it inevitable to investigate the factors that determine economic growth and to take these factors into consideration while determining policies.

Economists have therefore developed different theories of economic growth. Endogenous growth theory, which was developed as a reaction to growth theory, is of great importance. Internal growth theory has examined capital in two parts as physical and human capital. Because of physical and human capital on economic growth, it is emphasized that the factors affecting human capital will indirectly contribute to economic growth (Başar et al., 2016). There are many factors affecting human capital. Education and health, which is one of the main factors of human capital, will increase the efficiency of investments made in these areas in the long term. Therefore, it can be said that individuals can directly affect the human capital level (OECD, 2001). Education enables individuals to increase their knowledge and specialize in specific subjects. Health, on the other hand, affects the return on investment in human capital positively along with other indicators, especially the life span of individuals (Akça, 2015). Therefore, any kind of investment in people will contribute to economic growth. When the countries with high economic development are examined, it is seen that the education and health levels of these countries are generally high (Çetin & Ecevit, 2010).

All systems and organizations in the world aim to realize a society consisting of healthy individuals and healthy individuals. Because the basis of security, power, knowledge and happiness are healthy individuals. Today, the most accepted definition of universal health is the definition made by WHO (Larson, 1991). According to this definition, health; it is a state of complete physical, mental and social well-being as well as the absence of any illness and weakness. As it can be understood from the definition, health services to be provided to states by individuals; disease elimination, elimination of the factors that cause the disease or prevention measures (Koçak et al., 2017). All expenses incurred to provide these services are collected under health expenditures (Dinçer and Yüksel, 2019).

Key Terms in this Chapter

GDP: Gross Domestic Product

VAR: Vector AutoRegressive

GNP: Gross National Product

MRI: Magnetic Resonance Imaging

CT: Computed Tomography Devices

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