Measuring Learning’s Intensity and Scale Economies Effects in World Countries Health Sector Cost

Human resource is one of the most important factors of economic growth. So providing its health is very important. Moreover, improving human resources, in turn, depends on the provision of health care costs; the experience of world countries has shown that increasing the scale of production, the average cost decreases due to learning and economies of scale. These factors make access to health services easier and less costly. There are two questions in this investigation, the first is that the learning process has been in the health sector, and have the unit costs of this sector diminished with learning and increasing scale over time?. Moreover, this article sought to integrate two different literature of learning curve and Cobb-Douglas cost function to quantify the above-cited issues. Therefore, the data of 187 developed and developing countries over the period 2000-2018 were used. The results indicate that in the world countries learning and scale economies have been realized but the economies of scale not yet fully exhausted, and it can be exploited by increasing production. Also, in the developed countries the current output coefficient is insignificant. This means that return to scale is constant and they have benefited from all economies of scale. Besides, the learning coefficient rate is relatively high, and it is inferred that the health care sector in the developed countries has enjoyed both economies of scale and learning. On the other hand, the output coefficient for the developing countries is negative and significant which gives the average return to scale as 1.13, whence the economies of scale totally not to be exhausted and it is possible to exploit scale economies by increasing product size. Also, in these countries the learning rate dominates to the scale economies. Thus, the two static and dynamic components of cost advantage play a key role in reducing costs. Overall, the findings bear out that the rates of learning and scale economies in the developed and developing countries are different.One of the most vital goals of today's societies is to achieve a healthy and efficient workforce, since improving community health may well lead to the development of human capital, productivity enhancement, reduction in production costs, and economic growth. In this way, the scale economies, as well as the cost reductions due to experience and learning effects, play imperative roles in market structure and economic welfare. In the modern economic analyses, the knowledge accumulation and skill are classified in two ways. One is provided through investing in human capital, training programs, and experience in research and development, and the other way is obtained by joint production of goods and services and by doing repetitive work which is referred to as "learning by doing". At the start of this discussion, Wright (1936) reported learning process as an asymmetric relationship between average cost and cumulative output. Theoretically, scale economies points to average cost decreases as the level of output increases over time. Most studies carried out after 1970s have associated the learning process to neutral disembodied technical progress. In this kind of technology changes, the learning effects are independent of the other variables and just moving the cost function. Oppositely, some economists attribute productivity to the input-embodied technical progress, and believe that labor-embodied technical progress yield increases in economy’s capacity to take new technology and to reduce the production costs. Owing to the fact that economies of scale and learning lead to extract a predictable pattern which reduce the costs in each sector, the planers and strategic consultants employ the learning curve in their analyses. So, the learning curve is a tool widely used in production planning and cost prediction in the economic, social, and medical sectors. Therefore, this study sought to investigate the fundamental questions, in economics: whether the learning is an existing issue in the health care sector of world countries? Has the average cost of this sector decreased over time? And whether increase in scale causes decrease in costs. The answers to these questions guide us toward minimizing per capita cost which is a main objective of the health system. To this end, the health care data of 187 developed and developing nations based on the human development index during 2000-2018 were used to quantify learning intensity and scale economies, as well as studying their impacts on the costs.The methodology of this research is on the basis of the panel data econometric. Indeed, we need a rational model which is capable of scrutinizing the static and dynamic dimensions of cost advantage in the developed and developing countries. So, inspired by the learning process literature and using dual cost function of Cobb-Douglass production function we shall extract the learning curve.To this purpose, we explicitly give the relation between the average cost and cumulative output . On the other hand, the Cobb-Douglass cost function were used. Since the technology diffusion is acquired by the advance of knowledge, and the latter is, in turn, influenced by the cumulative experience or the learning process, the advances in knowledge in period t is linked with cumulative output through the formula A=nαc which grows with the exponent αc. Integrating Cobb Doglus, learning curve and using the formula A=nαc and then taking logarithm yields a modified version of the learning curve. By the way, the average cost is adjusted by GDP-deflator index to the constant price for 2010. Also, the output value by patient population and the cumulative output according to the cumulative patient population from beginning to the year t-1 were operated. By estimating the learning curve via the econometric technique of feasible generalized least squares (FGLS), one can compute the parameters of return to scale and learning rate through direct estimation of coefficients.