Relationship Between Employment and GDP in European Countries

The assignment presents a statistical analysis that reveals a positive linear relationship between employment (in thousand hours worked) and Gross Domestic Product (GDP) at current market prices in European countries. The study suggests that health contributes significantly to economic development, as healthy people are more likely to work longer and harder, contributing to GDP growth. The findings support the alternative hypothesis that regression model statistically significantly predicts employment rates, indicating a strong correlation between health and economy.

ERM SPSS

TABLE OF CONTENTS
Introduction..........................................................................................................................................1
Aim and Objective.......................................................................................................................1
Literature Review.................................................................................................................................1
Research question and hypothesis........................................................................................................4
Data Analysis........................................................................................................................................4
Regression Analysis.....................................................................................................................4
Conclusion............................................................................................................................................9
References..........................................................................................................................................10

INTRODUCTION
In recent years, there are significant advances in understanding the association between
health and economic development in low income countries. But in rich countries or developed
nation, this issue is not considered as a major problem (Macinko, Starfield and Shi, 2009). In the
present study, researcher aims at evaluating the contribution of health to economic development
of Europe. However, there are number of reasons on the basis of which it is essential to
emphasize on significance of health for the economy, in particular to the EU countries.
Therefore, through the means of undertaking the use of statistical tool, investigator aims to assess
the contribution of health towards the economic development of Europe. For this purpose,
regression model has been taken into consideration as it will assist in evaluating the correlation
between health and economic development. In addition to this, secondary analysis has been also
considered to develop suitable and reliable understanding regarding essential components about
the selected topic.
Aim and Objective
Aim:
The main purpose of conducting study is to evaluate the contribution of health to
economic development "health is wealth".
Objective:
To achieve the above aim it is important for the researcher to develop suitable objective
for the study which is as follows: Does economic development and health are collinearly related?
Hypothesis: Null hypothesis: Better health does not mean a richer economies Alternative hypothesis: Better health means a richer economies
LITERATURE REVIEW
There is sound theoretical and empirical basis to the argument that human capital matter
for economic development, but in past human capital is either defined narrowly or educated
inappropriately. Thus, the researcher aims to assess the theoretical prospects regarding
contribution of human health to the economic development of country. In this regard, study of
Mackenbach (2006) illustrates economic growth as the steady process by the means of which
productive capacity of the economy is increased over time to bring about rising levels of national
output and income. However, author herein also states that, it is measured through the means like
1

gross domestic product (GDP) in real terms (Mackenbach, 2006). Similar to this Malik (2006)
presents in their study that, there are three major factor on which economic development
depends: stock of labor, and productivity, the latter depending in turn on technological progress.
However, technological advancement can be seen as the major source of economic development
(Malik, 2006).
In the study of Marmot, Allenand Goldblatt, (2012) researcher found that, since human
capital matters for economic outcomes and health is considered as the significant element of
human capital, thus, health also matters for economic outcomes. In this regard, researcher
assessed that health is determined by the genetic, economic, social, cultural and environmental
factors, but it is possible that health of population could influence the economic development.
Furthermore, study of Mossialos and et.al, (2008) illustrates that health could contribute to
economic outcomes at two different levels i.e. individual and country level. However, in high
level income countries, health contributes mainly through four channels: higher productivity,
higher labor supply, higher skills as an outcome of higher education and training and most
importantly through savings available for right investment in physical and intellectual capital
(Mossialos and et.al, 2008).
In addition to this, through the means of (figure 1) researcher evaluates that; health of an
individual depends upon several factors such as: genetics, lifestyle, education, living and
working conditions etc. However, in regards to assess the contribution that health can make to
growth, it is essential for people to keep in mind about the positive feedback from income to
health. In this regard, Strittmatter(2011) states that There are two ways through which income
can influence health i.e. through the means of direct effect on material conditions that have a
positive impact on biological survival and health. While on the other hand, through the effect on
social participation, the opportunity to control life circumstances and the feeling of security.
2

Figure 1: Health Factors
(Source: Strittmatter, 2011)
In addition to this, research conducted by Stuckler, Arce and Mortensen, (2006) clearly
defines that lower the starting level of per capital gross domestic product (GDP) the higher is the
predicted growth rate. There are several principle mechanisms that could clearly illustrate the
effect of health on the economy which are: labor productivity, labor supply, education and
savings and investments (Stuckler, Arceand Mortensen, 2006). In context to labor productivity
scholar states that, healthier individual could reasonably be expected to produce more per hour
worked. While on the other hand, productivity could increase directly due to improved physical
and mental activity. On this subject matter Wilkinsonand Marmot, (2003) states that, physically
and mentally active individual can carry out work in more effective manner as well as make
more efficient use of technology, machinery and equipment etc.
In context to labor supply study of Özdenand Schiff, (2007) illustrates that, the impact of
health on labor supply is theoretically vague. However, it is common phenomena that healthier
individual does not spend sick days, as well as contribute positively towards the functioning of
business or society. However, if wages are associated to productivity than healthier workers are
more productive which indeed enhance their expectations to generate higher wages for the
efforts that they are employing (Özden and Schiff, 2007).
3

Thereafter, another factor that evaluates the contribution of health towards the economic
development is education. However, on the basis of human capital theory more educated
individuals are more productive (Arceand Tsolova, 2005). It is because of the fact that, healthier
people tends to achieve higher educational attainment and suffer less from school absenteeism
and early drop outs. Nowadays, savings and investments are also considered as important factor
for the people. However, it has been identified that, people with good health have a wider time
horizon and it may be consequently higher than the savings ratio (Weil, 2005).
RESEARCH QUESTION AND HYPOTHESIS
Methodology:
Through the means of literature review, researcher has been able to evaluate the
contribution of health on the economic development of European countries. Thus, it is important
for the investigator to prove it through the help of hypothesis testing. However, to test the above
defined hypothesis researcher will make use of SPSS tool in which regression model has been
undertaken to assess the correlation between health and economic development in Europe.
Research Question: Does economic development and health are collinearly related?
Hypothesis:
 Null hypothesis: Better health does not mean a richer economies
 Alternative hypothesis: Better health means a richer economies
DATA ANALYSIS
Regression Analysis
In general, linear regression can be defined as the approach for modeling the relationship
between a scalar dependent variable and independent variable. In the present study, researcher
aims at assessing the relationship between health and economic development in Europe. In this
regard, different variables have been undertaken which are associated with health and their
impact is identified through regression analysis model on the GDP of Europe.
Hypothesis 1:
H0–There is no relationship between life expectancy rate and GDP of Europe
H1 – There is relationship between life expectancy rate and GDP of Europe
Model Summary
Model Summary
4

Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .325a .106 .105 1.4793
a. Predictors: (Constant), Gross domestic product (GDP) at current market prices by NUTS 2
regions [nama_10r_2gdp] (Million euro)
ANOVA
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 419.490 1 419.490 191.703 .000b
Residual 3553.681 1624 2.188
Total 3973.172 1625
a. Dependent Variable: people aged 65 years: Life expectancy by age, sex and NUTS 2 region
[demo_r_mlifexp]
b. Predictors: (Constant), Gross domestic product (GDP) at current market prices by NUTS 2
regions [nama_10r_2gdp] (Million euro)
Coefficient correlation
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std. Error Beta
1
(Constant) 18.946 .045 421.887 .000
Gross domestic product
(GDP) at current market
prices by NUTS 2
regions
[nama_10r_2gdp]
(Million euro)
9.116E-006 .000 .325 13.846 .000
5

a. Dependent Variable: people aged 65 years: Life expectancy by age, sex and NUTS 2 region
[demo_r_mlifexp]
Findings:
On the basis of above computation, relationship between life expectancy rate and GDP
has been evaluated. However, with the r value of .325 indicates that there is a weak linear
correlation between both the variables. On the basis of this outcome, null hypothesis has been
accepted and alternative is rejected. Therefore, it can be said that life expectancy at the age of 65
people are unable to work effectively or dominantly which indeed lack in positive contribution
towards the economic growth of countries in Europe.
Hypothesis 2:
H0 – There is no relationship between tertiary education (level 5-8) and GDP of Europe
H1 – There is relationship between tertiary education (level 5-8) and GDP of Europe
Model Summary
Model Summary
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .831a .691 .690 150263.797
a. Predictors: (Constant), Gross domestic product (GDP) at current market prices by NUTS 2
regions [nama_10r_2gdp] (Million euro)
ANOVA
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 83028975056164.640 1 83028975056164.64
0 3677.231 .000b
Residual 37210535847665.516 1648 22579208645.428
Total 120239510903830.16
0 1649
6

a. Dependent Variable: Tertiary education (levels 5-8) - Population aged 25-64 by educational
attainment level, sex and NUTS 2 regions (estimated count) [edat_lfse_04]
b. Predictors: (Constant), Gross domestic product (GDP) at current market prices by NUTS 2
regions [nama_10r_2gdp] (Million euro)
Coefficient Correlation
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std. Error Beta
1
(Constant) 110113.918 4522.545 24.348 .000
Gross domestic product
(GDP) at current market
prices by NUTS 2
regions
[nama_10r_2gdp]
(Million euro)
4.038 .067 .831 60.640 .000
a. Dependent Variable: Tertiary education (levels 5-8) - Population aged 25-64 by educational
attainment level, sex and NUTS 2 regions (estimated count) [edat_lfse_04]
Findings:
From the above evaluation of regression analysis, correlation between tertiary education
and GDP has been evaluated. However, r value of .831 indicates that there is strong positive
linear correlation between both the variables. On the basis of this outcome, Alternative
hypothesis has been accepted and null is rejected. On the basis of this it can be said that,
increasing education level among people helps in their course in executing the work or task
assigned to them in an effective and efficient manner. Through the means of this, they are able to
provide positive contribution towards the economic growth of countries in Europe.
Hypothesis 3:
H0 – There is no relationship between employment and GDP of Europe
H1 – There is relationship between employment and GDP of Europe
7

Model Summary
Model Summary
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .799a .639 .639 688552.504
a. Predictors: (Constant), Gross domestic product (GDP) at current market prices by NUTS 2
regions [nama_10r_2gdp] (Million euro)
ANOVA
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 917025183223212.900 1 917025183223212.90
0 1934.226 .000b
Residual 517722169575790.200 1092 474104550893.581
Total 1434747352799003.00
0 1093
a. Dependent Variable: Employment (thousand hours worked) by NUTS 2 regions
[nama_10r_2emhrw] - all NACE sector - all in employment
b. Predictors: (Constant), Gross domestic product (GDP) at current market prices by NUTS 2
regions [nama_10r_2gdp] (Million euro)
Coefficient Correlation
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std. Error Beta
1 (Constant) 695542.993 26629.150 26.120 .000
8

Gross domestic product
(GDP) at current market
prices by NUTS 2
regions
[nama_10r_2gdp]
(Million euro)
15.448 .351 .799 43.980 .000
a. Dependent Variable: Employment (thousand hours worked) by NUTS 2 regions
[nama_10r_2emhrw] - all NACE sector - all in employment
Findings:
With the help of above computation of statistical test, researcher has been able to identify
the weather defined variables are collinearly related or not. On the basis of outcome generated
i.e. r value of 0.799 indicates that there is positive linear relationship between employment and
GDP of European countries. By the means of outcome generated, alternative hypothesis has been
accepted and null rejected. Further, with the significance value of .000 indicates that, regression
model statistically significantly predicts the outcome variables and it is good for the data. Thus,
it can be said that, constantly increasing employment rate indicates that there are more number of
people who are healthier as well as skilled. This indeed assists the course of economic conditions
of the country as they contribute towards the development of economic conditions.
CONCLUSION
On the basis of above study it has been evaluated that, health contributes significantly
towards the development of economy. It is because of the fact that, healthy people are able to
work for long and hard which assist the course of companies to generate higher financial returns
that indeed leads to GDP growth of the country in Europe. However, through the means of above
study it has been evaluated that health positively contributes towards GDP development of
Europe.
9

REFERENCES
Arce, R.S. and Tsolova, S., 2005. The contribution of health to the economy in the European
Union. Luxembourg: Office for Official Publications of the European Communities.
Macinko, J., Starfield, B. and Shi, L., 2009. The contribution of primary care systems to health
outcomes within Organization for Economic Cooperation and Development (OECD)
countries, 1970–1998. Health services research.38(3). pp.831-865.
Mackenbach, J.P., 2006. Health inequalities: Europe in profile. Produced by COI for the
Department of Health.
Malik, G., 2006. AN EXAMINATION OF THE RELATIONSHIP BETWEEN HEALTH AND
ECONOMIC GROWTH. [PDF]. Available through:
<http://icrier.org/pdf/Working_Paper_185.pdf>. [Accessed on 14th July 2016].
Marmot, M., Allen, J. and Goldblatt, P., 2012. WHO European review of social determinants of
health and the health divide. The Lancet.380(9846). pp.1011-1029.
Mossialos, E. and et.al., 2008. Funding health care: options for Europe. SAGE.
Özden, Ç. and Schiff, M.W., 2007. International migration, economic development & policy.
World Bank Publications.
Strittmatter, A., 2011. Health and Economic Development: Evidence from the Introduction of
Public Health Care. [PDF]. Available through: <http://ftp.iza.org/dp5901.pdf>.
[Accessed on 14th July 2016].
Stuckler, D., Arce, R.S. and Mortensen, J., 2006. The contribution of health to the economy in
the European Union. Public health.120(11). pp.994-1001.
Suhrcke, M. and et.al., 2005. The contribution of health to the economy in the European Union.
[PDF]. Available through:
<http://ec.europa.eu/health/ph_overview/Documents/health_economy_en.pdf>.
[Accessed on 14th July, 2016].
Weil, D.N., 2005. Accounting for the effect of health on economic growth. National Bureau of
Economic Research.
Wilkinson, R.G. and Marmot, M.G., 2003. Social determinants of health: the solid facts. World
Health Organization.
10