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Economics Research Institute Study Paper




Utah State University Department of Economics

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It is now recognized that the growth rate of per capita real income is not the only indicator of development. Development is a multidilnensional concept that focuses on development ofhuman beings through removal of poverty, ill health, illiteracy, and other social deprivations. The observed positive correlation between the growth of GNP per head and the average quality of life may not be as strong as it appears to be. It is argued that the causal relation between income and life expectancy, which is taken as a proxy for the index of quality of life works mainly through the impact of GNP on public expenditure in health care and poverty reduction. The objective of this paper is to examine this issue by using panel data. The dependent variable is life expectancy at birth while explanatory variables are real GDP per capita and per capita public expenditure on health. Using the data set for 29 countries over the 1990-2000 period we find that public provisioning of health services is Inore important than the growth of real income in expanding the most basic capability for human development.