CONTRIBUTION OF HEALTH IN ECONOMIC GROWTH: An application of VECM approach for Pakistan

Health is an important form of human capital. Microeconomics analyses suggest that health of the labour force makes an important contribution to productivity and income. Following the argument of Weil (2001), this study analyzes the possible links between economic growth and health for Pakistan. Thus the main goal of the study is 10 empirically investigate the importance of health as a direct and indirect cause of Pakistan's economic growth during 1960 - 2000. This is achieved by using VECM approach. The findings indicate that although growth tends to significantly improve health status in Pakistan but health is not Granger causing economic growth directly. There is, however, an indirect causal effect of health on the economic variables that could affect the process of economic growth in Pakistan (labour force. physical capital stock and human capital stock). Therefore, the study concludes that health is an important determinant of higher growth and a key 1001 available to policy-makers. These results would have important practical implications for public policy in Pakistan by providing policy-makers with a better technical understanding of development-related factors that are derived from the long-term changes in the health of the population.