The Elasticity of Health Expenditure on Agricultural Productivity Growth in Southeast Asia

Abstract

Background: Recently, agricultural productivity growth has experienced a sharp downward turn across the countries of Southeast Asia partly due to population aging, increasing pace of urbanization, and industrialization.

Objective: To provide empirical evidence to the elasticity of prevailing health spending as a proxy of human capital stock on agricultural productivity growth in Southeast Asia.

Methods: This study analyses data obtained from the World Development Indicators for 2000-2016 using panel data regression models.

Results: The empirical evidence suggests that prevailing health expenditure, though statistically significant, exerts a strong positive effect on agricultural productivity growth. Therefore, a unit rise in prevailing health spending relative to GDP would increase agricultural productivity growth by 28% across countries of Southeast Asia, all else constant.

Conclusion: The trend of rapid agricultural productivity declines in Southeast Asia could be altered by augmenting investment to the prevailing health spending as an indicator of human capital stock.

Policy implications: The governments of Southeast Asia should increase investment in prevailing health spending relative to GDP, to stimulate more growth in agricultural productivity, greatly improved human capital stock, and eventually increase economic growth.