Does governance matter for aggregate health capital?

Abstract

The point of departure of our analysis is the seminal work of Rodgers (1979) on the absolute and relative income hypotheses. We find that substituting the governance index for the Gini index is statistically the preferred regression model. Our findings lend support to the argument that governance matters. Further investigation provides evidence for two types of threshold effects: in terms of both absolute income and governance. For those countries below a threshold, absolute income is the most significant determinant of health, while for those above it, governance matters the most. The regression analyses are conducted on a sample of 112 states, which is representative of a wide range of absolute income and governance levels.

Notes

¹ The WB has six governance indicators. We exclude the first cluster because a high indicator can mean both a very democratic country and a dictatorship.

² The same level of absolute income is used by Gravelle et al. (2002) to investigate an absolute income threshold effect.