Investigating the long-term relationship between health expenditure and labor productivity in Iran

Background and aims: Growth of labor productivity is one of the most important factors of development and competitiveness of the economy. In targeting economic growth, a significant contribution is being made to improve productivity. Labor productivity in a community has several socio-economic dimensions. Since labor productivity reflects the level of production and performance of people in the community, it is therefore very close to general well-being, because when a society produces its population, it has more prosperity and resources than a lower-productivity economy. The situation of labor productivity determines the success of an economy in competing with other economies, with lower finished product costs and lower prices that may not be feasible for a low productivity economy and exit from market competition. Worker productivity in a community is one of the key multivariate variables, which is always a matter for the attention of community planners and policymakers. The importance of this issue for developing economies, such as Iran, is twofold; in fact, one of the main priorities of the Iranian economy is to improve productivity, which is, of course, in large-scale programs of the community, such as development plans (in development programs, it is usually said that one-third of economic growth will be achieved through improved productivity) Or general policies such as resistance policies and policies to reduce dependence on oil and enhance the competitiveness of the Iranian economy. Although productivity improvements in the Iranian economy have always been seriously addressed, significant improvement in productivity, especially compared with other economies, has been a mystery of numerous theoretical and empirical studies. One of the reasons for failure to improve the productivity indicators in Iran is that less attention has been paid to the relationships and determinants of productivity. Hence, effective factors on improving the productivity, has been the focus of attention of researchers in different fields. One of the most important determinants of labor productivity is the improvement of health indicators in the society.The health status of people in the community is regarded as human capital, whose health costs and community health as a net investment and treatment costs reduce the effects of illness as an alternative investment. Through various channels, health can affect the level of production and productivity of a country. First, directly in most cases, healthy people work better than others and have a more creative and ready mind. Healthier workers are physically and mentally stronger, they are less likely to go to work and gain a living. Health also has indirect effects on production and productivity. For example, improving health in the workforce will have the incentive to continue to study and acquire better skills, because improving health will, on the one hand, increase the attractiveness of investment in education and educational opportunities. Also, increasing health and health indicators in the society will help people save more by reducing mortality and increasing their life expectancy. Physical capital has increased as a result of increased popularity in society, and it will also indirectly affect labor productivity. Applying people with higher education in an economy, due to more human capital, leads to increased labor productivity and economic growth. At the firm level, the general health of the workforce reduces job stress and thus improves their productivity. Therefore, safety in the work environment is directly related to the ability to perform work. Of course, the health of the workforce is not just about their physical condition, but their mental health and communication with affection and respect in the workplace will improve their performance.  Unfortunately, the impact of health expenditures on improving productivity has been underestimated in Iran. Therefore, the purpose of this study is to examine the effect of health expenditure on proving labor productivity in Iran.  Methods: The present study has investigated the relationship between gross domestic product (GDP) and labor productivity using time series data related to the sharing of health expenditure during the period of 1351-1394. Due to the long-term nature of the effect of health expenditure on labor productivity, Johansson-Juselius co-integration has been used. One of the key concepts of econometric studies, especially in time series data, is the problem of the steady-state variables over time. If the time series variables used are not proportional to the model coefficients, while there may not be any relation or conception between the model variables, the coefficient of determination of its R2 can be very high and cause inaccurate inferences in this case. Of course, at macro level, we usually encounter non-invariant variables, and variables overlap from their previous path over time. Therefore, while it may be possible for two variables to diverge from their original paths and, in fact, to be non-negative, but they may move in one direction (They may be convergent). In econometrics, the concept of convergence is used to examine the long-run relationship between variables. The concept of convergence is that when two or more times series variables are linked to one another, based on theoretical foundations, to form a long-term equilibrium relationship, it may be that the series itself has a random process, but in the long run They follow each other well, so that the difference between them is stable (mana). Therefore, the concept of co-integration is a long-term equilibrium relationship that the economic system moves over time. The methodology is used to determine the number of convergent variables among the variables by first applying the maximum value of the special value and the effect test presented by Johansen and known as the likelihood ratio statistics. Then the Co-integration Equation and Vector Error Correction Model (VECM) are estimated. we also implicitly explained the impact of other variables such as education, per capita capital and urbanization on labor productivity. Results: The results indicate that per capita health expenditure has a positive and significant effect on labor productivity in long-term with a coefficient of 0.36. As the one percent increase in per capita expenditure of health improves the productivity of labor force in Iran by as much as 0.36 percent. Expenditures on education and physical per capita also have a positive and significant effect on labor productivity with coefficients of 0.41 and 0.09. But in terms of urbanization, urbanization is often associated with improved productivity, given that economic development theories have economic development with urbanization. What the current study suggests is that the rate of urbanization has not only been accompanied by improved labor productivity in Iran in the long run, but also urbanization has a negative and significant effect on the productivity of labor in Iran with a coefficient of 0.02. The short-term convergence rate (ECM coefficient) to long-term equilibrium value is -0.3 / 0, which indicates the high speed of the moderation, so that it takes less than three periods to adjust the short-term value to long-term equilibrium Conclusion: The present study shows that for budgeting of health sector, the long-term goals of it, namely, the impact of it on productivity and consequently economic growth and development should be considered. The results indicate that long-term health expenditures have a positive and significant effect on improving labor productivity. A one-percent increase in health spending will improve the labor productivity index by 0.36. A one percent increase in higher education costs will also increase labor productivity by 0.4 percentage points. The health and education sector has long-term effects and should not expect short-term results to be spent on these sectors, and policy-makers in general should increase the share of health and education of national income over time. Labor productivity. Another result of the study is the positive and significant impact of the existence of physical capital on labor productivity. This result is also consistent with theoretical and empirical expectations. Having a work tool and improving its technology can enhance human performance. Basically, one of the limitations of developing countries is the lack of sufficient funds for labor force recruitment. By mobilizing domestic and foreign capital, policymakers will be able to utilize more labor force and increase labor productivity by providing technological and capitalist needs. The present study shows that in order to improve the productivity of labor force in Iran, special attention should be paid to health and education. Eventually, the growth of urbanization in Iran leads to a confounding phenomenon and reduces the labor efficiency. Although based on economic theory, urbanization has been accompanied by economic development for developed countries, the results of this study shows that this category has not been true for Iran. Urbanization in Iran is not the developmental one, but due to the lack of facilities in rural areas, the unequal distribution of facilities at the geographical level, local unemployment and the increase in land prices and housing in urban areas; therefore, it cannot be expected that in the Iranian economy, urbanization along with Improvement of development indicators, but on the contrary, because of its disproportionate growth with socioeconomic facilities, the consequences of environmental degradation, pollution, traffic, inequality, destruction of social indicators and, consequently, the health of people in these areas, and therefore have a negative impact on labor productivity Laid down. Therefore, it is suggested that community planners move towards decentralization policies and improve business conditions in rural areas.