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The effects of health conditions on financial sector development

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  • Donou-Adonsou, Ficawoyi

Abstract

The relationship between the financial sector and health sector has been under investigated in the literature. Based on the efficiency wage theory, one can conjecture that a healthy worker, unlike the unhealthy one, can work, save, and contribute more to widening the financial sector. Using panel data over the period 1995–2016, we examine whether improvements in health conditions can help explain the expansion of the financial system in Sub-Saharan Africa. The results indicate that better health conditions contribute to financial development. Specifically, higher life expectancy, lower infant mortality, higher health expenditure, and lower out-of-pocket expenditure significantly contribute to financial sector development. These results suggest that better health conditions increase domestic savings and foster financial development. The study, therefore, enhances the importance of health status and spending on health infrastructure in economic development and calls on policymakers to invest in human health.

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  • Donou-Adonsou, Ficawoyi, 2022. "The effects of health conditions on financial sector development," Economic Modelling, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:ecmode:v:114:y:2022:i:c:s0264999322001936
    DOI: 10.1016/j.econmod.2022.105947
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    2. Yuan Zhu & Bingyue Wan & Lixin Tian, 2022. "Protection of Intellectual Property Rights, Financial Development and Green Low-Carbon Endogenous Economic Growth," Sustainability, MDPI, vol. 14(20), pages 1-20, October.

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    More about this item

    Keywords

    Health conditions; Financial development; Fixed-effects; Generalized method of moments; Pooled-mean group;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I10 - Health, Education, and Welfare - - Health - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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