Estimation of a Health Production Function: Evidence from East-European Countries

Abstract

The purpose of this study is to estimate a health production function for 13 East European countries.¹ Using panel data from 1997 to 2005 on a diverse array of economic, demographic, environmental, and lifestyles factors, we analyze a health production function at the macro level in order to determine the most efficient way of allocating limited resources for improving the overall health status of countries in the sample. To control for individual country heterogeneity, we employ panel analytic methods of fixed effects, random effects, and Arellano–Bond estimator. The results indicate that economic growth as measured by GDP per capita, number of doctors, investment in human capital formation, reduction of air pollution, and residence in urban areas significantly reduce infant mortality and thus improve the health status of countries in the sample. These findings are useful, not only for serving as background for health care policy decisions, but also for a better understanding of the factors that affect the health condition of the region.