Asian Economic and Financial Review, 2015, 5(11): 1251-1257

Asian Economic and Financial Review

ISSN(e): 2222-6737/ISSN(p): 2305-2147

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DETERMINANTS OF LIFE EXPECTANCY: A PANEL DATA

APPROACH

1† 2
Abdalali Monsef --- Abolfazl Shahmohammadi Mehrjardi
1
Associate Professor, Payame Noor University, Department of economics, Tehran, Iran
2
Master of Economics, Payame Noor University, Department of Economics, Tehran, Iran

ABSTRACT
This study is concerned with understanding the factors that affect the life expectancy in 136
countries for the period 2002–2010. According to the life expectancy literature, the determinants of
life expectancy can be classified into social, economic and environmental factors. In this respect,
the panel data method is employed to compute the relationship between life expectancy and
selected economic, social and environmental factors. The results of this study suggest that
unemployment and inflation are the main economic factors that influence the life expectancy
negatively. But, the gross capital formation and gross national income and affect the life
expectancy positively as well. The urbanity seems to be the main socio-environmental cause for
mortality. According these results, this study presents a number of recommendations in order to
improvement of life expectancy.
© 2015 AESS Publications. All Rights Reserved.

Keywords: Economic factors, Environmental factors, Health status, Life expectancy, Social factors, Panel data.
JEL Classification: I19, O50, E17.

Contribution/ Originality
This study is one of very few studies which have investigated the effects of inflation and
unemployment, gross capital formation and economic development level (as economic factors),
urbanity (as social factor) and CO2 emission (as environmental factor) on life expectancy using
panel data method.

1. INTRODUCTION
Human beings have continuously sought to improve their skills and to reach a life which is
more and more dignified; for this reason, improvement in health has always been, today as in the
past, one of the most important social objectives (Colantonio et al., 2010). Health is one of the
† Corresponding author
DOI: 10.18488/journal.aefr/2015.5.11/102.11.1251.1257
ISSN(e): 2222-6737/ISSN(p): 2305-2147
© 2015 AESS Publications. All Rights Reserved.
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 Asian Economic and Financial Review, 2015, 5(11): 1251-1257

most important assets a human being has. It permits us to fully develop our capacities. If this asset
erodes or it is not developed completely, it can cause physical and emotional weakening, causing
obstacles in the lives of people. The previous connection can be seen as the relationship between
income and health. Life cycle models have explained how one’s health status can determine future
income, wealth and consumption (Lilliard and Weiss, 1997). In essence, the main aim of a public
health care policy is to maintain and improve the nation’s health status. Therefore, it is crucial to
identify the factors which contribute to the health of the population. The information on the
nation’s health status helps policy makers and practitioners in their search for cost effective
mechanisms, providing health services and reallocation of health resources to optimize the gains
from health expenditures. The measurement of the nation’s health status is difficult to measure
directly since this situation is produced by a set of economic, social and environmental factors.
Therefore, the cognition of a proxy for health status in order to determine the factors which
contribute to the health of the population is essential.
In a theoretical basis, Mankiw et al. (1992); Barro (1996) and Grossman (1972) have
developed models that include health capital as a significant variable for economic growth.
Nevertheless, life expectancy is the most used variable to represent it. This variable is defined by
the United Nations as the average number of life years since birth according to the expected rate of
mortality by age as well. Therefore, Life expectancy in a country is a broad measure of the nation’s
health status (Halicioglu, 2010).
This study is concerned with understanding the factors which affect the life expectancy in 136
countries for the period 2002-2010. To do this, we organized this study as bellows: After the
introduction, section 2 is allocated to the literature. Section 3 discusses the method of data
collection and methodology of study. The major findings are presented in Section 4 and section 5
reports the conclusions.

2. REVIEW OF LITERATURE
The review of literature on life expectancy as a proxy for nation’s health status is useful in
order to investigate the factors that affect it. In this respect, this section is allocated to review of
literature on determinants of nation’s life expectancy. For example, in a recent study, Hansen and
Strulik (2015) found that that the cardiovascular revolution led to an increase in adult life
expectancy by about 2 years, which caused higher education enrollment to increase by 7 percentage
points across U.S. states.
Shin (2013) surveyed the impact of a pension system on the life expectancy and the lifetime
utility level. This study suggested that the pension system can make life expectancy longer or
shorter and it is not always true that the pension system improves the lifetime utility level.
Hazan (2012) indicated a positive correlation between the percentage change in schooling and
the change in life expectancy at birth during 1960-1990.

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Balan and Jaba (2011) showed that the determinants with a positive impact on life expectancy
of the Roma population are wages, the number of beds in hospitals, the number of doctors, and the
number of readers subscribed to libraries, while the determinants with a negative impact on life
expectancy are the ratio Roma population and the ratio of the illiterate population for the year 2008.
Halicioglu (2010) investigated the factors of life expectancy in Turkey for the period 1965-
2005. In this study the determinants of life expectancy in Turkey have been classified into selected
economic, social and environmental factors. According to the results of this study, the nutrition and
food availability factors were the main positive factors for improving lifetime. But, smoking was
the main cause for mortality.
Bergh and Nilsson (2009) analyzed the relation between three dimensions of globalization
(economic, social and political) and life expectancy using a panel of 92 countries over the period
1970-2005. They found a very robust positive effect from economic globalization on life
expectancy, even when controlling for income, nutritional intake, literacy, number of physicians
and several other factors.
Mariani et al. (2008) determined the relationship between life expectancy and environmental
quality dynamics. The results showed environmental conditions affected the life expectancy.
Yavari and Mehrnoosh (2006) analyzed the effects of socio- economic factors on life
expectancy using multiple regression analysis. This study showed that there is a positive, strong
correlation between life expectancy as an independent variable and per capita income, health
expenditures, literacy rate and daily calorie intake. Also, it revealed that there is a negative strong
correlation between life expectancy and the number of people per doctor in African countries.
Leung and Wang (2003) investigated the relationship between health care, life expectancy and
output using a modified neoclassical growth model. They showed income and economic
development factors have positive impacts on lifetime.
Bernard et al. (2003) investigated the effects of saving behavior on life expectancy. They
indicated that decrease in saving behavior did not relate to increase in individual life expectancy.
Castello and Domenech (2002) provided a theoretical model in which inequality affects per
capita income when individuals decide to accumulate human capital depending on their life
expectancy. According to the finding of this study, the distribution of education was depended on
the existence of multiple steady states.
Cervellati and Sunde (2002) investigated the relationship between human Capital Formation,
life expectancy and the process of economic development, experienced by the Western world when
passing from an environment of economic stagnation to sustained growth. The results indicated that
the human capital formation and life expectancy potentially reinforced each other due to advances
in technological progress.
Summing up, the review of presented studies shows that the determinants of life expectancy
can be divided into the economic, social and environmental factors. Accordingly, in this study, the
impacts of these factors on life expectancy are estimated to follow the existing literature.

© 2015 AESS Publications. All Rights Reserved.

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 Asian Economic and Financial Review, 2015, 5(11): 1251-1257

3. METHODOLOGY
To investigate the relationship between life expectancy and economic, social and
environmental factors we use the panel data method. In panel data method, the same cross-sectional
unit (say a family or a firm or a state) is surveyed over time (Gujarati, 2004). The standard panel
data form can be presented as bellow:
yit = x'itβ + αi + εit= x'itβ + uit i= 1, 2, …, N t=1,2, …, T (1)
Where, y and x' denote the dependent variable and K×1 regressor vector respectively. β is a
K×1 vector of coefficient and u indicates the error term. The number of cross sectional
observations is N and these units are repeatedly measured. This is the conventional panel data
model defined by an unobserved individual effect and time varying coefficients.
As mentioned in section 1, this paper attempts to analyze the relation between some economic,
social and environmental factors and nation’s health status using a panel of 136 countries over the
period 2002-2010. To do this, the life expectancy factor is considered as a proxy for health status.
Also, the economic factors are included: inflation, unemployment, capital information rate and
economic development degree. The per capita national income factor is used to classify the
countries in terms of development degree by the World Bank. In this paper this factor is used to
evaluate the effect of development degree on life expectancy. The urbanization and CO 2 emission
are considered as social and environmental factors. Accordingly, the model (2) is presented as
bellow:
LE i,t = ai + β1 INF i,t + β2 UNEM i,t + β3 GCF i,t + β4 UP i,t + β5 CEM i,t + β6 DUM i,t + εi,t (2)
Where, LE is life expectancy at birth total, INF and UNEM are inflation and unemployment
rate respectively. GCF is gross capital formation (% of GDP of selected countries), UP is Urban
population (% of total population of selected countries) as a proxy for urbanization, CEM is CO 2
emissions (metric tons per capita), DUM is a dummy variable that for the countries which had the
gross national income more than world average income is equal to 1 and ε t is the regression error
term. The equation (2) is estimated using STATA. It should be noted that the present study enjoys
from the date which has been presented by World Bank.

4. EMPIRICAL RESULTS AND DISCUSSION

As mentioned before, to evaluate the model (2) and after determining the stationary of selected
variables, the selection of the best techniques, fixed or random effects, is necessary to analyze
panel data.
According to equation (1), in Random Effect Model (REM) α i is uncorrelated with εit and the
observed regressors xit. But, if αi is correlated with regressors, this can be called the Fixed Effect
Model (FEM) (Hubler, 2005). To decide between fixed or random effects the hausman test has
been used where in that the null hypothesis is that the preferred model is random effect vs. the
alternative the fixed effect.

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 Asian Economic and Financial Review, 2015, 5(11): 1251-1257

It basically tests whether the unique errors (ui) are correlated with the regressors, the null
hypothesis is they are not (Greene, 2008). The estimated results showed that the hausman statistic
and its prob. are equal 86.27 and 0.00 respectively. Accordingly, the model (2) can be estimated by
FEM. The results are provided in table 1.
According to the table 1, the estimated results based on the GLS method indicate that except
CO2 emission factor, all of variables in the model (2) are statistically significant at the 1% level. As
can be seen, the coefficient of inflation rate (- 0.173) and unemployment rate (- 0.24) are
statistically significant at the 1% level, indicating the negative relationship between life expectancy
and inflation and unemployment.

Table-1. The estimated results of model (2)

Variables Coef. Std. Err. z P>|z|
INF - 0.173 .0256096 -6.75 0.000
UNEM - 0.24 .0316361 -7.59 0.000
GCF 0.18 .0243131 7.41 0.000
ٍUP 0.196 .0107095 18.28 0.000
CEM 2.31*10-7 2.47×10-7 0.94 0.35
DUM 6.377 .4952146 12.88 0.000
Intercept 52.911 .8172971 64.74 0.000
Source: calculated by authors

Also, the gross capital formation variable has a significant positive effect on life expectancy.
On the other hand, the estimated value for urbanization is equal to 0.196. This means that, with the
increase of one percent in urban population as an indicator of urbanization, the life expectancy
increases by 19.6 percentage or almost 71.5 days in intended countries. The coefficient of dummy
variable is equal to 6.377, indicating that the average of longevity in the countries that have the
gross national income (GNI) more than the average GNI in the world countries is more than poor
countries by 6.377 years.

5. CONCLUSION
The present paper examines the link between health status and economic, social and
environmental factors for 136 countries during 2002-2010. The life expectancy is considered as the
proxy of health status. According to the previous study that indicated the determinants of life
expectancy we can classify these factors into economic, social and environmental factors. In this
study, the inflation rate, unemployment rate, gross capital formation and gross national income are
the main economic factors. To our knowledge, this is the first study that engages inflation and
unemployment rate as economic factors that affect life expectancy. Also, we use the urbanization
and CO2 emission as the social and environmental factors. To do this, the panel data method is
used. The obtained results by using STATA software show that inflation rate and the
unemployment rate has a significant negative impact on life expectancy in 136 selected countries,

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 Asian Economic and Financial Review, 2015, 5(11): 1251-1257

while the unemployment rate is more effective. The urban population factor, as a proxy for
urbanization, as well as gross capital formation has a significant impact on life expectancy as well.
To investigate the effect of economic development degree on life expectancy, the intended
countries are divided into two groups: the countries that have the gross national income more than
global average income and the countries that have the gross national income less than global
average income. The results indicated that the countries with more income than the global average
income have a higher life expectancy by 6.377 years. Summing up, the economic indices that used
in this study have a significant impact on life expectancy as well as urbanization. So, planning for
improvement of these indexes can provide the basis for the enhancement the health status of the
global community.

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