Original Research Article

International Regional Science Review

2023, Vol. 0(0) 1–26
Public Health Development © The Author(s) 2023
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DOI: 10.1177/01600176231160494
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Evidence From Chinese
Cities

Hui Zhang1 

Abstract
High-quality construction of public health system is the key to maintain social economic
activities be ordered and stable. The aim of this study is to understand whether public
health development can promote economic growth and how. We construct a public
health development index combining the variables of local pollution control and health
care by EVM method. Based on the panel data of Chinese 283 cities from 2004 to 2017,
fixed effect model and two-stage least squares model are used to test the impact of
public health development on economic growth. Then, we discuss the heterogeneous
impact of public health development on economic growth though the threshold re-
gression model, under different government intervention, employment population
scale and urbanization ratio. What’s more, we discuss the possible transmission effect
of three human capital mechanisms, namely mortality, consumption rate and em-
ployment population size between public health development and economic growth.
The conclusions are: (1) For every 0.1 unit increase in public health development, the
growth rate of real GDP can be increased by 5 percentage points, which can drive the
nominal GDP growth by about 0.17 percentage points. (2) Public health development
can promote economic growth regardless of the scale of urban employment pop-
ulation. Only when the urbanization ratio exceeds 70.87 and the government inter-
vention level is lower than 0.058, the development of public health is conducive to the
improvement of urban economic development. (3) Public health development helps to

1
Fanli Business School, Nanyang Institute of Technology, Nanyang, China

Corresponding Author:
Hui Zhang, Fanli Business School, Nanyang Institute of Technology, Road Changjiang 80, Nanyang 473000,
China.
Email: zhanghui1@nyist.edu.cn
2 International Regional Science Review 0(0)

promote economic growth, mainly through two paths, reducing mortality and in-
creasing human capital accumulation. And, reducing mortality is more conducive to
urban economic growth than increasing human capital accumulation.

Keywords
urban development, public health, human capital

Highlights
(1) For every 0.1 unit increase in public health development, the growth rate of real
GDP can be increased by 5 percentage points, which can drive the nominal
GDP growth by about 0.17 percentage points.
(2) The heterogeneous regression results show that public health development can
promote economic growth regardless of the scale of urban employment
population. Only when the urbanization ratio exceeds 70.87 and the gov-
ernment intervention level is lower than 0.058, the development of public
health is conducive to the improvement of urban economic development.
(3) Public health development helps to promote economic growth, mainly through
two paths, reducing mortality and increasing human capital accumulation.
Moreover, reducing mortality is more conducive to urban economic growth
than increasing human capital accumulation.

Introduction
Globalization promotes the international trade of goods and the cross-border exchange
of people. And, infectious diseases, which do not respect national boundaries, spread
rapidly in the international community and have a profound impact on global politics
and economy (Mccausland 2020). By the end of June 2021, the COVID-19 outbreak in
2019 had spread to more than 200 countries, with 183 million confirmed cases and
3.96 million deaths worldwide. According to Organization for Economic Cooperation
and Development (OECD) estimates, the COVID-19 outbreak will halve global
economic growth and lead to economic recession in some countries in the future,
casting a shadow on global economic prospects. With the fragile and unbalanced
recovery of the global economy, the problems of low growth, high debt and high
income gap will be further aggravated (Tachmatzidis 2020). Thus, facing the epidemic,
governments have taken unprecedented economic control measures to ensure the
smooth operation of the national economy (Ceylan et al. 2020). Furthermore, under the
threat of transnational infectious diseases, global health governance and economic
growth have become an important issue in the international community (Aguilar et al.
2021).
Zhang 3

The residents’ demand for health is also increasing, and their demands for good
public health and medical conditions are becoming more and more intense. According
to the data of medical and health from World Bank Database, the average life ex-
pectancy of developed countries such as the United States, the United Kingdom,
Germany, Sweden, Denmark and Norway is over 78 years old, and their average
medical expenditure is generally over USD 4000. In Asia, only Japan and Singapore is
with higher per capita medical expenditure and life expectancy, the average medical
expenditure is 3733 and 2280 dollars, and the life expectancy is 84.1 and 82.9 years
respectively. Meanwhile, with the development of public health is making great
progress, such as the improvement of medical level, medical security system and living
environment, the health level of workers in China has been greatly improved (Yuan
et al. 2020), China’s total medical and health expenditure increased from
5025.93 billion yuan in 2001 to 59,121.90 billion yuan in 2018, with a compound
annual growth rate of 15.60 percent. In 2000, China’s average health expenditure was
just 361.9 yuan, reaching 4148 yuan by 2018, 11 times that of 2000, while life ex-
pectancy was extended from 71.4 years to 77 years.
Actually, public health is the premise and foundation of sustainable economic
development. In the UN’s Vision 2030 of 17 Sustainable Development Goals (SDGS),
good health and well-being is the third most important goal, next to nopoverty and no
hungry. It is emphasized that good public health development is essential for sus-
tainable and stable economic growth. On the one hand, the development of public
health itself has positive externalities; on the other hand, from the perspective of human
capital investment theory, the development of public health increases the health stock
and then significantly promotes economic growth (Zhao et al. 2012). The related fields
mainly include health economics, public economics and economic growth theory,
which try to explain the relationship between public health development and economic
growth. For example, the impact of public health on economic growth was reflected by
the endogenous and spillover effects of human capital. With the arrival of the new
epidemic, China’s strict prevention and control policies, and good public health support
have maintained sustained economic growth compared with negative economic growth
in other countries.
However, economic growth in turn will restrict and affect the stock and level of
public health. For example, the change of life style, environmental pollution and
destruction, social income inequality and its derived health inequality of residents all
reflect the constraints of economic growth on the development of public health. And,
China is relatively short of medical and health resources, and there is a relative gap
between urban and rural areas and between regions. Especially in the background of the
global pandemic of the COVID-19, the economic development of all countries in the
world has been impacted differently. Because of Chinese core position in the global and
supply chains, continuous supply chain disruption may affect Asia and even the global
economy. At the same time, the restrictive measures taken by other countries due to the
epidemic may also cause the interruption of international trade, affecting the normal
operation of China’s industrial chain (Ryter et al. 2021). Furthermore, the COVID-19
4 International Regional Science Review 0(0)

has greatly affected the health level of workers, thereby reducing its work efficiency
and hindering economic development. Therefore, how to effectively prevent and
control diseases under the COVID-19? How to satisfy the public health and medical
needs with less health resources? How to effectively improve the health level of
residents and maintain stable economic operation? In the special period of COVID-19
spreading, these questions have been particularly important.
Thus, we measure the development level of urban public health from the per-
spectives of pollution control and health care, and discuss the impact of public health
development on urban economic growth in China. Then, we discuss the heterogeneous
impact of public health development on economic growth under different levels of
government intervention, employment population scale, urbanization ratio. Finally, we
analyse the possible transmission mechanism of public health development on eco-
nomic growth. Therefore, this paper not only points out the direction for the devel-
opment of public health and economic growth in China, especially in the context of the
COVID-19 pandemic, but also provides empirical support, the development of public
health and the stimulation of economic vitality in developing countries.
The rest of the paper is structured as follows: the second part is literature review; the
third part constructs the empirical model and variable explanation; the fourth part
discusses the baseline regression, heterogeneity analysis and mechanism analysis of
public health development on economic growth; the fifth part is the discussions; the last
part is the main conclusions and policy implications.

Literature Review
Economic Growth
Economic growth is a quantitative concept that refers to the increasing level of
economic output in a region over a given time, which can be measured by regional
GDP, per capita GDP growth or per capita disposable income growth. At present,
scholars’ research on economic growth can be divided into three stages: The first stage
emerged in the early 20th century, represented by Harrod (1933), with the key as-
sumptions that the “capital-output ratio” was seen as an exogenous variable, interest
rates were fixed, and capital and labour elements were irreplaceable. It inferred that
capital accumulation was the only driving force for economic growth. In the second
stage, Solow (1957) relaxed the hypothesis that capital and labor factors are irre-
placeable, and increased exogenous technological progress in the production function.
The empirical results showed that labor and capital input can only explain 12.5 percent
of economic growth, while exogenous technological progress can explain 85 percent of
that; The third stage, represented by Romer (1986, 1990), relaxed the exogenous
assumption of technological progress. The main point was that the rate of technological
progress determines the equilibrium growth in the long-term economic growth, so it is
also called endogenous growth theory.
Zhang 5

It can be seen that the important reason for economic growth is the improvement of
productivity, and the core elements are capital, labor and technological progress. For a
country, due to the diminishing marginal effect of labor and capital investment, the
original investment-oriented economic development mode will face serious bottleneck
constraints after the economic development reaches a certain stage. For example, in the
development process of China, the rapid economic growth mainly depends on re-
sources, capital, labor factor inputs and large-scale infrastructure construction support.
(Fu et al. 2014; Zilibotti 2017), but after the per capita GDP exceeds US $10000 in
2019, the consumption of resources and environment will increase exponentially with
every percentage point of economic growth. Therefore, we must rely on the im-
provement of total factor productivity to achieve long-term and steady economic
development (Kruseandersen 2017). At the same time, human capital is one of the main
factors affecting technological progress and improving total factor productivity. The
development of public health is bound to affect the physical condition and health of
workers, such as government investment in medical and health undertakings, social
medical security system, urban green environment and pollution. Healthy workers are
full of energy and creativity in terms of physical strength and energy. They are more
productive and can earn higher income. Especially for developing countries, diseases
and disabilities have greatly reduced the hourly wages of workers. The industrial
structure of developing countries depends more on labor input compared with de-
veloped countries. Therefore, this paper discusses the impact of public health de-
velopment on economic growth for China, thereby providing experience reference for
other developing countries.

Public Health Development and Economic Growth

The existing researches focus on the mechanism of public health on economic growth is
mainly on its impact on human capital, which is an important part of the health level of
human capital (Acemoglu and Johnson 2007). According to the life cycle theory, the
increase of life expectancy will increase the savings of rational man in working period
and promote capital accumulation and economic growth. From this perspective, the
investment in public health will have an endogenous effect on economic growth
(Bretschger et al. 2017). Therefore, this paper reviews the relationship between public
health development and economic growth from the perspective of human capital in the
endogenous growth theory, which can be divided into the following two categories:
The first category researches the impact of government public health expenditure on
economic growth.The economic growth effect of public health expenditure mainly
comes from two aspects: on the one hand, the positive externality brought by the public
characteristics of public health products. On the other hand, the direct public health
investment can improve the health level of labors, leading to the economic growth
effect. Arrow et al. (1970) made a pioneering contribution, they assumed that gov-
ernment expenditure is productive. On this premise, they put the public capital stock
variables into the macro production function. They believed that government
6 International Regional Science Review 0(0)

expenditure on public utilities can bring benefits to private investment. However,

government expenditure only has an impact on economic growth in the short term, but
it dose not have an impact on steady-state economic growth. Liu & Zhang (2008) made
an empirical analysis from 1981 to 1999 on China by using the public capital model of
endogenous economic growth theory. They found that Chinese public health expen-
diture has a direct negative effect on economic growth, however, the increase of public
health expenditure increases the marginal elasticity of human capital, which has an
indirect contribution to real economic growth. De Mendonça & Baca (2017), taking
75 developing countries as an example, believed that public health expenditure can help
promote economic growth. To sum up, from the perspective of human capital in-
vestment theory, the increase in health stock caused by the health investment from
government is a kind of human capital investment, which will inevitably lead to
economic growth. Moreover, there are externalities in public health services. On the
one hand, the negative externalities of health service market will lead to the output of
health products contrary to the best social demand, which requires the government to
expand public health expenditure to make up for the gap between them. On the other
hand, as a special public production, health service has consumption externality. That is
to say, people can improve their health status, raise their working productivity and
promote economic growth by consuming health services and products.
The second category studies the impact of pollution on economic growth. Nordhaus
and Weitzman (1992) believed that pollution will not only harmful to the health level of
workers, but also will cause an annual economic growth rate loss of 0.04 percentage
points in a long period. Chen (2009) pointed out that the continuous accumulation of
pollution emissions will continuously reduce the environmental carrying capacity and
natural environmental quality of the whole society, and bring negative externalities to
the output or quality of each economic unit or even the whole economy. To sum up,
environmental pollution will affect economic development through the following two
ways. Firstly, cities with serious pollution will significantly reduce the attractiveness of
human, thereby limiting the increasing returns to scale and agglomeration effects of
cities, which will slow down the urban economic development (Connor et al. 2016).
Secondly, pollution will destroy the accumulation of human capital, and human capital
is one of the most important factors to promote economic development. Thus, en-
vironmental pollution mainly inhibits economic development by slowing human
capital accumulation and reducing urban attractiveness (Del & Lopez-Garcia 2020).
The three marginal contribution of this paper is as follows: (1) Most literatures
ignore the welfare loss caused by environmental pollution in the process of economic
growth, and environmental pollution may also affect economic development by re-
ducing the accumulation of human capital. This paper constructs the urban public
health development index system from the urban pollution control and health care level,
and it then discusses the impact of public health development on economic growth from
the urban pollution control and health care level. (2) This article discusses how the
development of public health affects economic growth from multiple dimensions. This
paper focuses on the role of human capital mechanism in public health development
Zhang 7

and economic growth through mortality, human accumulation and consumption rate; it
also compares the direction and magnitude of the effects of the three approaches on
economic growth, and it further details the transmission effect of human capital on
public health development and economic growth. (3) This article explores the het-
erogeneous effects of public health on economic growth. It examines the differences in
the paths of economic growth caused by public health development under different
employment population sizes, government intervention levels and urbanization levels.
Therefore, it enriches the empirical research on the effect of public health development
on economic growth, and puts forward more targeted policy recommendations based on
the specific situation of Chinese cities.

Models, Variables and Data

Establishment of Empirical Model
Based on the Romer (1990)’s endogenous growth theory, the influence mechanism of
public health development on economic growth is as follows: the improvement of
public health development will improve the health level of workers, increase theirs life
expectancy, and then affect urban economic growth. The baseline regression model is
as follows:
Ggrit ¼ β0 þ β1  Inoeit þ β2  Pubhit þ β  Contit þ t þ α þ εit (1)

Among them, Ggrit is the GDP growth rate of city i in t year, Inoeit is the technical
level, Pubhit is the index of urban public health, Cont is control variables, t is the
unobservable time variable and α is the unobservable individual variable representing
time and city fixed effect.

Variables
(1) Explained variable: Annual growth rate of GDP. This paper analyzes the
nominal growth rate and real growth rate of urban GDP.
(2) Core explanatory variable: Public health development. The development of
urban public health includes a wide range of contents, such as environment,
medical level, etc. In this paper, the development of public health is divided
into pollution control and health care (Suparmi et al. 2018). Table 1 is the index
system of public health development, and selects EVM method to give weight.

According to China’s urban health development index from 2004 to 2017, ArcGIS is
used to draw the schematic diagram of that in 2004 and 2017. It can be found that the
development level of urban public health in China has improved to varying degrees
from 2004 to 2017 in Figure 1. Nevertheless, it has not changed the current situation of
low public health index in most cities. Furthermore, most cities with better public health
8 International Regional Science Review 0(0)

Table 1. Evaluation Index System of Public Health Development.

First Grade EVM

General Target layer Indexes Second Index Weight

Public health Pollution Green coverage rate of built district (%) 0.190
development control General industrial solid waste utilization 0.145
rate (%)
Centralized treatment rate of wastewater 0.118
treatment plant (%)
Harmless treatment ratio for house refuse 0.106
(%)
Health care Number of hospitals 0.152
Number of practising doctors 0.121
Number of hospital beds 0.173

Figure 1. The index of Chinese urban public health in 2004 and 2017.

development are located in the eastern region or provincial capital cities, showing
obvious regional heterogeneity.

(3). Control variables:

① Technical level. This paper uses the number of invention patents applied by cities
to represent the level of technological innovation.
② Consumption rate. In many classical models, there is a basic assumption of
complete conversion from savings to investment (Solow 1957). However, in
reality, due to the flow of capital between countries and the lack of effective
investment, this conversion is not complete (Baxter & Crucini 1993), especially
Zhang 9

for cities, even if the savings can be converted into investment. Therefore, the
inevitable control variable in economic growth is savings. However, limited by
the availability of data, this paper chooses consumption rate to measure the status
of savings, inferred by Lei & Gong (2014) using the ratio of total retail sales of
consumer goods to GDP as the consumption rate.
③ Total employment. As labor force is one of the important variables in the
production function, for China, the rapid economic growth after 1978 is largely
caused by the demographic dividend of labor transfer caused by urban-rural dual
structure (Ming & Gao 2011). Therefore, the change of labor force is also an
important factor affecting economic growth.
④ Industrial structure: Since the reform and opening up, industry has been the main
force of China’s economic growth, so this paper uses the proportion of industrial
output value in GDP to measure the urban industrial structure.
⑤ Opening up: As for China, due to its strong manufacturing industry and in-
sufficient domestic demand, opening up is an important force affecting economic
growth. Therefore, this paper selects the actual use of foreign capital to measure
the degree of opening up (Yao & Yu 2009). Table 2 shows the detailed description
of all the variables.

Empirical Regression Results and Discussion

Baseline Regression
Through the F-test of the “city” dummy variable, the individual effect is significant at
the 1 percent significance level, and the original hypothesis shows that there is no
individual effect will be rejected. After the Hausman test, the p-value is less than 0.01.
Therefore, this paper selects the fixed effect model for panel model regression. B-P test
and Pesaran (2015) method were used to test the heteroscedasticity and cross-sectional
correlation, respectively. The results show that the equation has heteroscedasticity and
cross-sectional correlation problems at the 1 percent significance level. If not treated,
the significance test of statistical results is invalid. Therefore, this paper selects
Driscoll-kraay standard error to estimate the significance level of the core explanatory
variable (Driscoll & Kraay 1998), which deals with cross-sectional correlation and
heteroscedasticity problems. This method improves the original statistics of signifi-
cance test. The regression results are as follows:
According to the baseline regression results in Table 3, public health development
contributes to the economic growth, and the impact of public health development on the
real growth rate of GDP is far stronger than that on the nominal growth rate. For every
0.1 unit increase in public health development, the growth rate of real GDP can be
increased by 5 percentage points, which can drive the nominal GDP growth by about
0.17 percentage points. This can be explained by price changes. The development of
public health in China is dominated by government input, which will (1) reduce the
price of medical insurance, (2) reduce the monopoly of existing public health
10 International Regional Science Review 0(0)

Table 2. Selection and Description of the Variables.

Variable type Variable Name Variable Description Data Sources

Explained Real GDP growth The real GDP growth rate IChina urban statistical
variable rate data published by China yearbookJ (2005–2018)
national Bureau of
statistics
Nominal GDP Nominal GDP minus nominal
growth rate GDP of the previous year/
nominal GDP of the
previous year
Core Public health The development of public IChina urban statistical
explanatory development health is divided into YearbookJ2005–2018
variables (pubh) pollution control and IChina environmental
health care. Table 1 is the statistics
index system of public YearbookJ2005–2018
health development, and
selects EVM method to
give weight.
Control Consumption Total retail sales of consumer IChina urban statistical
variable rate (Csr) goods/GDP yearbookJ2005–2018
Total A measure of the total labor IChina statistical yearbook
employment force in a city of science and
(Tsp) technologyJ2005–2018
Technical level Number of urban patent
(Inoe) applications
Industrial Industrial output value/GDP
structure (Ssr)
Opening up (Ror) FDI/GDP

institutions, and (3) reduce the effect of expansionary monetary policy on raising prices.
The reduction in the price level as a result of public health developments offsets the
increase in nominal GDP, which includes the price level, and has no effect on real GDP.
Due to the construction of pollution control and hospitals invested by the government is
the main support for public health developmen. Therefore, if the government increases
the expenditure on public health, builds more hospitals and invests more medical staff.
It can protect the physical and mental health of more workers, which is conducive to the
city’s attraction to talents. It can not only improve the production efficiency of workers,
but also stimulate the innovation vitality of human capital, boost the development of
China’s economy with higher quality.
As for control variables, technological innovation can increase the real growth rate
of GDP by 0.0937 percentage points for 0.1 unit increase, but it can only drive the
nominal GDP by 0.0051 percentage points. Since the reform and opening up, through
technological innovation and institutional innovation, China has liberated the shackles
 Zhang

Table 3. Baseline Regression Results.

Nominal GDP Growth Rate Real GDP Growth Rate

Explained
variable (1) (2) (3) (4) (5) (6) (7) (8)

Inoe 0.099 0.056* 0.051* 1.365** 1.312** (2.00) 0.937*

(1.45) (1.80) (1.73) (2.18) (1.82)
Pubh 1.582** 1.491*** 1.317*** 1.628*** 36.95** 35.69** 33.99** (2.14) 50.53***
(2.45) (2.65) (2.70) (3.03) (2.35) (2.33) (3.40)
Csr 0.193*** 0.180*** 0.375* 0.677***
(4.65) (4.63) (1.86) (3.47)
Tsp 1.5e-04** (2.04) 2.1e-04*** 0.001 0.004**
(2.47) (0.94) (2.60)
Gpr 8.5e-07** -3e-05* (1.94)
(2.25)
Ssr 0.001 0.184***
(0.47) (3.75)
Ror 0.103 2.719
(1.02) (1.35)
Time effect Control Control Control Control Control Control Control Control
Fixed effect Control Control Control Control Control Control Control Control
Intercept 0.534*** 0.553*** 0.322*** 0 6.401*** 6.132*** 6.521*** 0
(–40.65) (21.62) (7.82) (18.46) (17.21) (15.79)
R-square 0.8012 0.8025 0.8451 0.8466 0.5531 0.5538 0.5550 0.5872
Note: The value of t is in parentheses, and ***, ** and * are significant at the levels of 1 percent, 5 percent and 10 percent, respectively.
11
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of labor factors, capital factors, technological factors and other production factors in the
period of planned economy. China also improved labor productivity, capital pro-
ductivity and total factor productivity, promotes its economy to achieve unprecedented
long-term and high-speed growth.
Secondly, every 0.1 percentage point increase in consumption rate will reduce the
real GDP growth by 0.06 percentage points, which indicates that the economic growth
of Chinese cities is largely driven by investment and export. The pulling effect of
consumption on China’s economic growth is gradually weakening. In the early stage of
reform and opening up, consumption is the most important force to stimulate economic
growth. However, in the process of marketization, urbanization and internationali-
zation, unreasonable income distribution and lagging transformation of public ex-
penditure seriously restrict the growth of consumption, making the pulling effect of
consumption on the economy more and more weak.
Thirdly, although the increase of industrial share contributes to economic growth,
China’s rapid economic development still faces the problem of unreasonable industrial
structure. The main reason is that most of China’s products are low value-added, low
technology and labor-intensive products, and the overall industrial competitiveness is
not strong enough. Iron and steel, cement, electrolytic aluminum, flat glass, ship-
building and other industries have great pressure to resolve overcapacity. Moreover, the
contradiction between resources and environment is acute. In 2020, China’s GDP will
account for 17 percent of the world’s GDP, but it will consume more than half of the
world’s steel, cement and coal. China’s environmental carrying capacity is close to the
upper limit, and 70 percent of the cities are not up to the standard of air quality, which
seriously endangers the physical and mental health of Chinese residents.
Fourthly, the real GDP can increase by 0.004 percentage points when the total
number of employment increases by 10,000. Although there is a significant positive
correlation between them, the coefficient is small. This is because China’s aging
population is accelerating, and the total population of working age is beginning to
decline. Starting from 2012, there will be an annual reduction of 2.3 million labor force,
and there will soon be an inflection point for the transfer of rural surplus labor force.
Besides, China’s labor costs rise rapidly. Since 2000, China’s nominal wage growth has
continued to rise, and labor costs in most Southeast Asian countries are only 50 percent
of China, or even less than 20 percent in some cases. These situations indicate that the
“demographic dividend” has been weakening. Although the “demographic dividend” is
declining, it is replaced by the human capital dividend. With the continuous trans-
formation of China’s economic development mode, the contribution of labor force to
economic growth has also undergone profound changes, and high-quality human
capital has become a more important new source of driving force.

Robustness Test
In order to ensure the reliability of the baseline conclusions, the following robustness
tests are carried out in Table 4: (1) Control city-year joint fixed effect. In the baseline
 Zhang

Table 4. Robustness Test.

Real GDP Growth Rate

Variable (1) (2) (3) (4) (5) (6) (7) (8)

Inoe 0.973* 0.715* 0.745** 0.972* 0.903* 0.568* 1.016 ** 0.752**

(1.93) (1.80) (2.27) (1.70) (1.70) (1.69) (2.33) (1.97)
Pubh 24.588*** 50.36*** 50.87*** 52.59*** 66.72*** 52.88*** 63.23*** 40.54***
(4.23) (3.41) (3.46) (3.12) (4.90) (5.56) (3.82) (3.68)
Csr 0.628*** 0.683*** 0.697*** 0.686*** 0.683*** 1.149** 0.341*** 0.421***
(3.19) (3.46) (3.56) (3.54) (3.33) (2.03) (3.21) (2.79)
Tsp 0.005*** 0.004*** 0.004*** 0.004** 0.010*** 0.004** 0.002** 0.003**
(3.51) (2.63) (2.64) (2.25) (3.74) (2.32) (2.15) (2.44)
Gpr -3e-05* -3e-05* -3e-05** -3e-05* -3e-05** -3e-05*** -3e-05* -3e-05***
(1.82) (1.96) (1.98) (1.96) (2.08) (6.86) (1.98) (2.84)
Ssr 0.184*** 0.184*** 0.182*** 0.185*** 0.187*** 0.205*** 0.1723** 0.163**
(3.78) (3.75) (3.71) (3.81) (3.90) (9.57) (3.83) (3.26)
Ror 2.808 2.782 2.875 2.691 2.422 3.021 2.282 2.739
(1.39) (1.38) (1.43) (1.33) (1.20) (1.04) (0.89) (1.34)
Time Control Control Control Control Control Control Control Control
effect
Fixed Control Control Control Control Control Control Control Control
effect
Intercept 0 0 0 14.55*** 4.446 4.986 3.473*** 4.767*
(6.45) (0.71) (0.74) (2.77) (1.81)
R-square 0.5864 0.5874 0.5875 0.5860 0.5898 0.5898 0.5103 0.6022
Note: The value of t is in parentheses, and ***, ** and * are significant at the levels of 1 percent, 5 percent and 10 percent, respectively.
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14 International Regional Science Review 0(0)

regression, although the fixed effects of city and year are controlled, some variables of
regional level changing with year may be omitted. Therefore, this paper changes the
year fixed effect into the city-year fixed effect, and controls the city fixed effect and the
city-year joint fixed effect. (2) Replace the measures of explained variables. This paper
uses per capita GDP to replace real GDP and nominal GDP to measure urban economic
development, and then re-estimates the model. (3) Reconstruct the weight of public
health development indicators. In order to add the influence of subjective factors on the
index system of public health development, this paper uses the subjective and objective
weighting method to re-weight the urban public health development on the basis of
EVM weighting method. (4) Replace control variables. Innovation efficiency is the
ratio of innovation input and output. Regional innovation efficiency can represent the
technological innovation level of a city to a certain extent. Therefore, innovation
efficiency is used to replace the original number of patents as a proxy variable to
measure the regional innovation level. (5) Remove the extreme points. Excluding
Beijing, Shanghai, Tianjin and Chongqing, which are far higher than other cities in
public health development, and then re-estimates the model. This is because extreme
points may have a systematic effect on the regression results. In the sample, even if only
the regression results of very large and very small points are significant, the regression
results of the full sample will be significant. (6) Control the lag term of the explained
variable. There may be inter temporal correlation in economic growth, so this paper
further uses differential GMM to regress. It can be found that under different robustness
test conditions, public health development still has a significant positive effect on
economic growth, which indicates that the regression result is robust. In Column (7)
and (8), we divided the samples into cities of “pilot public hospital reform” or not. The
pilot reform of public hospitals is the most important exogenous intervention policy of
the government in public health in China, which has been mentioned in many gov-
ernment documents. It can be found that the results do not change significantly after
controlling this government policy.

Endogeneity Test
Although the two-way fixed effect model can largely reduce endogeneity, it cannot be
completely eliminated. According to the above statement, regions with rapid devel-
opment are more likely to plan more hospitals and attract more doctors to work locally,
it is likely to have a two-way causal relationship. Therefore, this paper attempts to use
the instrumental variable method to deal with the potential endogenous variable-public
health development.
We think number of hospitals (Noh) in 1948 and number of green design patents
granted (Nog) can be used as instrumental variables for public health development
index in a certain city. First, the number of hospitals in 1948 did not affect the economic
growth rate during the study period, but it laid a foundation for the development of
regional public health during the study period, and therefore it had a significant positive
correlation with the development level of public health. Second, the number of green
Zhang 15

design authorization in a city does not directly affect economic growth, but it represents
the enhancement of regional environmental protection awareness. So it has a significant
positive correlation with the development of public health. The data source of the
former is from the local Chronicles of various regions during the Republic of China,
while the data of the latter is from the patent database of CNKI. The missing samples
are assigned as 0.
Therefore, Noh and are taken as instrumental variables. Three tests are needed to test
whether instrumental variables are applicable. The first is under-identification test. The
original hypothesis is that there is under-identification, or that instrumental variables
are independent of endogenous variables. In this paper, Kleibergen-Paaprk LM statistic
is used to test, and the result shows that p-value is 0.0555, so there is no problem of
insufficient recognition at 10 percent significance level. The second is the weak in-
strumental variable test, which is a further test of under-identification. The original
hypothesis is that instrumental variables have a strong correlation with endogenous
variables. After calculation, the Cragg-Donald Wald F statistic is 92.468, so it can be
considered that the correlation between them is high. Finally, the over-identification test
is used to test the rationality of instrumental variables. The Hansen J statistic in this
paper is 0.011, and the p value is 0.9162. Therefore, it is reasonable to accept the
original hypothesis and set the instrumental variable.
After 2SLS regression, the coefficient of the predicted value of public health de-
velopment is 11.13, and the p-value is 0.001. Therefore, even if there are endogenous
problems, the driving effect of public health development on economic growth is still
significantly positive.

Threshold Characteristics
In China, highly developed regions such as the Yangtze River Delta and the Pearl River
Delta may have reached or approached the steady economic growth rate, but there are
still many underdeveloped regions in the central and western regions with low mar-
ketization, extensive local protection and low labor quality, which make it necessary to
further develop (Deng & Bai 2014). This paper selects the level of government in-
tervention, urbanization and the scale of the employed population as the threshold
values to analyze the threshold effect of public health development on economic
growth. This paper uses the proportion of government expenditure in GDP as the proxy
variable of government intervention; and DMSP/OLS stable night light as the proxy
variable of urbanization ratio (Ke et al. 2022); the scale of the employed population
represents the attraction of the region to employment. According to Hansen (1999), the
threshold model is set as formula (2)–(4):
Ggrit ¼ λ0 þ λ1 Dit  IðTherit ≤ r1 Þ þ λ2 Dit  IðTherit > r1 Þ þ λ0t Xit þ εit (2)
16 International Regional Science Review 0(0)

Ggrit ¼ λ0 þ λ1 dit  IðTherit ≤ r1 Þ þ λ2 dit  Iðr1 < Therit < r2 Þ þ λ3 dit  Iðr2 ≤ Therit Þ
þ λ0t Xit þ εit
(3)

Ggrit ¼ λ0 þ λ1 dit  IðTherit ≤ r1 Þ þ λ2 dit  Iðr1 < Therit < r2 Þ

(4)
þ λ3 dit  Iðr2 ≤ Therit < r3 Þ þ λ4 dit  Iðr3 ≤ Therit Þ þ λ0t Xit þ εit

Where I() indicates an indicative function. When the expression in parentheses is true,
the value is 1, and when it is false, the value is 0. Therit is the threshold variable, xit is
the control variable, ε is a random perturbation term, and λ0 is a constant term.
Based on the results of Table 5 and Table 6, there is a significant single threshold
effect between public health development and economic growth by using urbanization
ratio as the threshold variable. When the urbanization ratio exceeds 70.87, the co-
efficient of public health development on the real GDP growth rate is significantly
positive, while the coefficient of cities below this value is significantly negative. It can
be seen that the unsustainable growth of environment and public health exists in cities
with low urbanization ratio, which is not conducive to the improvement of economic
development.
When we take the scale of employment population as a threshold variable, there is a
significant double threshold effect between public health development and economic
growth. The impact of public health development on the real growth rate of GDP in
cities with the employment population scale below 0.139 is significantly negative,
while the impact of public health development on that of cities with the employment
population scale between 0.139 and 0.315 is significantly positive. It indicates that the
higher the employment population size, the greater the pulling effect of urban public
health development on the economy. The possible reason is that for cities with low scale
of employment population, there is a large outflow of population, and it is difficult to
retain and attract labors. At this time, all kinds of resources used to develop the real
economy are used to support the development of public health, and the economic
growth rate will be reduced due to the inefficient allocation of social resources.
However, for cities with a large number of employed people, government will improve
the livability of cities in order to retain talents, so as to attract more human capital.
When we take the level of government intervention as a threshold variable, there is a
significant double threshold effect between public health development and economic
growth. When the level of government intervention is lower than 0.34, public health
development can significantly promote economic growth. When the level of gov-
ernment intervention is between 0.034 and 0.058, public health development still has a
significant positive effect on economic growth. When the level of government in-
tervention is higher than 0.058, the development of public health is not conducive to
economic growth. It can be found that appropriate government intervention to improve
public health development is conducive to the improvement of residents’ health level
and the production efficiency of workers. However, excessive government intervention
Table 5. Estimated Threshold Value.
Zhang

Analysis Model 95% Confidence

variables Threshold Variable Selection Choosing Reason Threshold Value Coefficient interval

Pubh Urbanization ratio Single The double threshold Light intensity < 33.821** (2.07) 65.803 1.840
threshold model has 70.87
low significance and Light intensity ≥ 40.197** (2.28) 5.577 74.817
small 70.87
F value. Three
threshold
model is significant
but F = 0
Employment Double The second coefficient Employment ratio < 32.429** (2.27) 60.424 4.434
population threshold in the 0.135
ratio single threshold 0.135 ≤ Employment 34.363* (1,84) 2.358 71.086
model is ratio < 0.268
not significant, and Scale of employed 84.197* (3.29) 33.977 134.420
the population ≥ 0.268
F value in the three
threshold model is 0
Government Double The F value is the largest Government 314.171*** (5.18) 195.288 433.054
interference threshold in the double interference <
threshold 0.034
model and the F value 0.034 ≤ government 64.466*** (2.77) 18.752 110.180
in interference <
the three threshold 0.058
model is 0 Government 42.455*** (3.12) 69.1077 15.801
interference ≥
0.058

Note: The value of t is in parentheses, and ***, ** and * are significant at the levels of 1 percent, 5 percent and 10 percent, respectively.
17
18 International Regional Science Review 0(0)

Table 6. Results of Different Threshold Regression.

Critical Value
Analysis
variables Threshold Variable Model F-Value p-Value 1% 5% 10%

Pubh Urbanization ratio Single 47.418*** 0.007 39.748 24.023 18.874

threshold
Double 23.240*** 0.000 11.088 5.278 2.935
threshold
Three 0.000* 0.073 0.000 0.000 0.000
thresholds
Scale of employed Single 26.499*** 0.000 14.073 7.537 5.604
population threshold
Double 21.585*** 0.003 16.203 4.045 1.735
threshold
Three 0.000* 0.087 0.000 0.000 0.000
thresholds
Government Single 52.102*** 0.000 30.009 24.369 19.901
interference threshold
Double 25.111** 0.010 24.632 16.974 5.853
threshold
Three 0.000* 0.080 0.000 0.000 0.000
thresholds
Note: The value of t is in parentheses, and ***, ** and * are significant at the levels of 1 percent, 5 percent and
10 percent, respectively.

is not conducive to the improvement of urban marketization level, not conducive to

stimulating the vitality of market economy, hindering the improvement of economic
development level.

Mechanism Analysis
The Mediating Effect of Mortality Rate
The previous analysis shows that public health development can significantly and
steadily affect the actual growth rate of Chinese urban economy. On the contrary, poor
health status of residents will hinder economic development through a variety of
mechanisms. First of all, the poor personal health of residents will lead to the reduction
of labor productivity and the loss of social welfare (Banister 1998). For individuals,
poor personal health status will lead to increased psychological burden, decreased
personal income level and shortened life expectancy. For workers, poor health con-
ditions will not only affect the production efficiency of individual workers, but also
have negative impact on the productivity efficiency. Secondly, poor health status may
hinder residents’ access to education, and the level of education is closely related to
residents’ personal contribution to the national economy. As a result, poor health may
Zhang 19

affect economic growth. Thirdly, from the perspective of the whole country, poor health
conditions will cause a decline in the proportion of productive population in the total
population of a country, resulting in a decrease in the number of employed people. Life
expectancy data at the urban level are difficult to estimate, but can be measured by
mortality.
Although in addition to public health development, important factors affecting
mortality include the age structure of the population, and regions with more serious
aging tend to have higher mortality. This paper argues that the employment population
size can be used to control this part of the factors, because one of the great differences
between China and western countries is that the unemployment rate in China is often
very low (Feng & Guo 2019). Therefore, the total number of urban employment can
basically measure the number of working-age workers. This paper argues that con-
trolling this part and the fixed effect of the city can better control the impact of
population age structure on mortality. Therefore, the first mediating effect model
established is as follows:
Morrit ¼ η0 þ η1 Pubhit þ η2 Eprit þ ηXit þ αi þ t (5)

Ggrit ¼ φ0 þ φ1 Pubhit þ φ2 Morrit þ φXit þ αi þ t þ εit (6)

Results as shown in column (5)–(8) of Table 7, it can be found that if all other factors
are controlled, public health development affects the real growth rate of GDP by
reducing mortality. Therefore, the development of public health can improve the level
of economic development by reducing the mortality of workers.

The Mediating Effect of Consumption Rate and Employment Rate

On the one hand, the development of public health will improve the consumption level
of residents and reduce the savings rate (Gruber & Yelowitz 1999), thus it affecting the
accumulation of capital and further affecting economic growth. On the other hand, the
development of public health will also attract more labor force to work here, and
healthy labor force is more inclined to increase working hours and labor intensity, so as
to improve the level of human capital in the region, and thus promote the regional
economy (Garthwaite et al. 2014). It can be found that the above two mechanisms are
the control variables in the impact of public health development on economic growth.
Although the multicollinearity judged by variance expansion factor does not exist in
baseline regression, the possibility of the above two mechanisms is still not ruled out.
Then we will discuss whether public health development can affect economic growth
by increasing the amount of human capital and changing the consumption rate. Similar
to the previous section of this part, this paper first establishes the following model:
Csrit ¼ χ 0 þ χ 1 Pubhit þ αi þ t (7)
 20

Table 7. Mediating Effect Test in Mortality.

Mortality Real Growth Rate

Explained
Variables (1) (2) (3) (4) (5) (6) (7) (8)

Inoe — — 0.081** 0.083** (2.38) — 1.312** (2.00) 1.312** (2.00) 0.938* (1.82)
(2.16)
Pubh 2.935** 2.947** 1.906* 1.031** —- — 0 0
(5.45) (2.08) (3.42) (1.97)
Morr — — — — 12.59*** 11.582** 11.582** 17.219***
(2.35) (2.14) (2.14) (3.40)
Epr — 0.010 (0.19) 0.039 (1.11) 0.081** (2.35) — — — —
Csr — — 0.036*** 0.027** — 0.375* 0.375* 0.677***
(2.70) (2.02) (1.86) (1.86) (3.47)
Tsp — — -7e-04*** -6e-04*** — 0.002 (0.94) 0.002 (0.94) 0.004*** (2.60)
(6.45) (5.33)
Gpr — — — 2.3e-06*** — — — 3.0e-05*
(9.36) (1.94)
Ssr — — — 0.019*** — — — 0.184***
(15.97) (3.75)
Ror — — — 0.092 (0.55) — — — 2.719 (1.35)
Time effect Control Control Control Control Control Control Control Control
Fixed effect Control Control Control Control Control Control Control Control
Intercept 1.283*** 1.279*** 1.235*** 0.414** 19.139*** 28.95*** 28.95*** 0
(83.50) (61.04) (53.44) (3.30) (9.87) (4.25) (4.25)
R-square 0.8112 0.8124 0.8162 0.8404 0.5531 0.5550 0.5550 0.5872
Note: The value of t is in parentheses, and ***, ** and * are significant at the levels of 1 percent, 5 percent and 10 percent, respectively.
International Regional Science Review 0(0)
Zhang 21

Tspit ¼ ν0 þ ν1 Pubhit þ αi þ t (8)

In Table 8, columns (1), (3) and (2), (4) and (5) were the results of the significance
test using the general t-test and the D-K standard error, respectively. It can be found that
the impact of public health development on consumption rate is not significant.
However, public health development significantly and steadily improves the total
number of employment. Therefore, it is consistent with the previous section, and the
method of adding predictive value is used to test the mediating effect. As shown in
column (6), public health development promotes economic growth by increasing the
total number of employment, which is a significant intermediary mechanism. However,
after introducing the mortality prediction in column (7), the above mechanism is no
longer significant. Therefore, it can be found that, compared with increasing the total

Table 8. The Mediating Effect Test of Consumption Rate and Employment Number.

Explained
Variables Rate of consumption Total employment Real GDP Growth Rate

(1) (2) (3) (4) (5) (6) (7)

Inoe — — — — 6.906** 0.967* 0.947*

(0.97) (1.94) (1.93)
Pubh 0.071 0.071 1530*** 1530*** 1403*** 0 0
(0.09) (0.10) (17.51) (6.72) (6.52)
Morr — — — — — — 68.659**
(1.96)
Csr — — — — 1.044 0.681*** 0.783***
(1.01) (3.49) (3.64)
Tsp — —- — — — 0.037*** 0.093
(3.98) (1.67)
Gpr — — — — 4e-04*** 2.8e-05* 2.8e-05*
(8.04) (1.88) (1,87)
Ssr — — — — 0.145 0.183*** 0.183***
(0.76) (3.72) (3.67)
Ror — — — — 31.157*** 2.853 2.867
(3.39) (1.45) (1.47)
Time Control Control Control Control Control Control Control
effect
Fixed Control Control Control Control Control Control Control
effect
Intercept 1.179*** 1.179*** 29.67*** 29.67*** 0 0 0
(51.10) (80.85) (11.26) (6.75)
R-square 0.4671 0.4671 0.1989 0.1989 0.2198 0.5864 0.5868
Note: The value of t is in parentheses, and ***, ** and * are significant at the levels of 1 percent, 5 percent and
10 percent, respectively.
22 International Regional Science Review 0(0)

number of employment, reducing mortality is more important for public health de-
velopment to influence economic development.

Discussions
Some papers are basically consistent with our conclusion that the development of
public health promotes economic growth (Tambo et al. 2019; Zhao et al. 2012; Zhao
and Wang 2020); Investment in renewable energy can also reduce air pollution, im-
prove public health care and promote economic growth (Mujtaba and Shahzad 2021).
In addition, from the perspective of spatial correlation, some scholars found that al-
though the development of public health in China promoted the economic development
on the whole, except the development of primary health care per capita has a negative
effect on economic growth, and the impact of public health development on economic
growth in different regions is heterogeneous (Wang 2015). In contrast, Khan et al.
(2020) found that increased public health spending and poor environmental perfor-
mance undermined economic growth with low efficiency and low labor productivity.
In addition, this paper also has some shortcomings. Firstly, if the types of public
health services can be further refined in the future, we can promote economic growth
through public health more targeted. Secondly, this paper does not consider the spatial
correlation between cities, and increasing the spatial distance and other indicators can
make the empirical results more consistent with the reality. In future studies, the spatial
distance can be embedded into the model and the types of public health can be further
refined to make the results more objective and accurate.

Conclusions and Suggestions

This paper constructs the index of urban public health development from two aspects of
urban pollution control and health care. Through endogenous test and robustness test, it
is concluded that public health development contributes to the economic growth.
Besides, through the threshold regression model, this paper discusses the heterogeneity
of public health development on economic growth under different urbanization ratio,
employment population scale and government intervention level. Furthermore we
discuss the mediating effect of mortality, human accumulation and consumption rate
between public health and economic growth, and we obtain the following main
conclusions:

(1) The baseline regression shows that public health development contributes to
the improvement of economic growth, and the impact of public health on the
real GDP growth rate is much stronger than that on the nominal growth rate.
Furthermore, this paper takes the number of hospitals in 1948 and number of
green design patents granted as instrumental variables, and we still can get the
positive correlation between public health development and economic growth.
In addition, this paper conducts a robustness test on the baseline regression
Zhang 23

results by controlling the city-year-joint fixed effect in the baseline regression

model, replacing the measurement index of explained variables, reconstructing
the weight of public health development index, replacing the control variables,
eliminating the sample extreme points, and controlling the lagged term of
explained variables. As a result, public health development still has a sig-
nificant positive effect on economic growth. Therefore, if the government
increase investment in health development, improve the governance of urban
environmental pollution will help to promote urban economic growth. Con-
sequently, government should further increase the investment in urban public
health, establish a more perfect mechanism for prevention and control of
infectious diseases, and improve the residents’ medical insurance system. At
the same time, government should also pay attention to the pollution control
and green environment construction of a city. It’s better to constantly promote
technological innovation, and pay attention to promoting green economic
growth while maintaining high-speed growth.
(2) The heterogeneity analysis of public health development and economic growth
shows that: Firstly, when we take urbanization ratio is taken as the threshold
variable, there is a single threshold effect between public health development
and economic growth. Only if the level of urbanization exceeds 70.87, there is a
positive correlation between public health development and economic growth.
Secondly, when we take the scale of the employed population as the threshold
variable, there is a significant double threshold effect between public health
development and economic growth, and with the increase of employed
population, public health development plays a significant role in promoting
economic development. Thirdly, when we take government intervention as a
threshold variable, there is a significant double threshold effect between public
health development and economic growth. If the level of government inter-
vention exceeds 0.058, the development of public health is not conducive to the
improvement of economic development. Therefore, it is necessary to increase
government investment in public health, and further attract the agglomeration
of higher-quality human capital in cities. What’s more, it is better pay more
attention to the improvement of urban functions and the public service capacity,
and establish a modern urban governance system, and improve the manage-
ment ability of cities.
(3) Public health development helps to promote economic growth, which is mainly
achieved by reducing mortality and improving human capital accumulation.
The mediating effect of public health development on reducing mortality is
greater than that of human capital accumulation. First of all, government should
continue increasing the investment in health and further enhance the proportion
of public health financial investment. Government should also ensure the fi-
nancial support for the normal operation of the disease control system and
narrow the gap between urban and rural areas. Secondly, public health services
should be reasonably developed according to the basic situation of urban
24 International Regional Science Review 0(0)

employed population. To promote labor productivity for economic growth the

governments of cities with high employment population should further in-
crease investment in public health and adjust relevant health policies, not only
to meet the needs of residents’ various medical services, but also improve the
accessibility of public health services for low-income workers. However, for
cities with large population loss and low employment scale, excessive re-
sources should not be invested in public health development, public health
services should be matched with population conditions to ensure people’s
medical service needs.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship,
and/or publication of this article.

Funding
The author(s) disclosed receipt of the following financial support for the research, authorship,
and/or publication of this article: This work was supported by the National Social Science Fund of
China (Grant No. 20BGL192); the National Social Science Fund of China (Grant No.
21BGL248); 2022 Research Topics of Henan Federation of Social Sciences (Grant No. SKL-
2022-2422); 2022 Nanyang Institute of Technology Interdisciplinary Research Project (Grant
No. NGJC-2022-13).

ORCID iD
Hui Zhang  https://orcid.org/0000-0002-6967-9141

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