Wednesday, March 20, 2013

Health and economic growth

Our next topic is health...

Here is a nice intro from Jeffrey Sachs (Prof at Columbia).  Here is the full Sach's Report.

Here is a video of Sachs providing an overview 10 years later. 

Here is a nice overview of the relationship(s) between health and economic growth from The World Bank. It is long, but well worth the read.

For those of you interested in reading a more detailed analysis of the relationship between health and economic growth, here is a good paper from NBER. In both of these latter papers, note the discussion of the endogeneity problem we've been talking about all semester, and the econometric solution of instrumental variables.


  1. You don't have to necessarily be an economist to recognize that a healthier population will tend to lead to economic growth. The reason for this is that people recognize that if a workforce is not at its potential, then production is not at its potential. This is true according to the Cobb Douglas Production function formula. In developing countries, the labor force is not only reduced by poor health of individuals, but also the people who are taking care of the ill are not working themselves. Health is very important in economic growth and development, so much, that the UN uses health as an index in the HDI scale. As for the endogeneity problem, there seems to be a correlation between a parameter or variable and the error term. A reason for this might be that health or another factor is not explained in enough detail. Economic parameters are more measurable than health parameters since health cannot be completely measured at times. As a little side note, health is restricted to physical well-being, but also mental well-being. Mental well-being is a lot harder to measure than physical well-being. Someone could be perfectly health and fit, but their mental health might be poor. Economic conditions can attribute to mental stress, but some people are born with mental health issues. In fact, some individuals might not even know that they have mental health issues. The point is that a physically healthy person can produce the same amount of output as a unhealthy person because of mental health issues.

  2. Considering the "health <--> econ growth and development" relationship in developing countries, one thing to remember is that the nature of the work done in many developing countries is hazardous in itself. Most jobs in developing countries lend themselves to disease and casualty just due to the environment in which the employees must work in. These sorts of jobs are low-skill laborer jobs where workers can easily be replaced, especially with booming population growth. Hence, the benefits that could be seen by the employer in taking their workers health into consideration are far outweighed by the costs, especially with no structured healthcare. The majority of health insurance in the US is provided by employers and subsidized by the government through tax exemptions. In other nations, healthcare is greatly subsidized by government as well because there is a recognizable value in a healthier workforce as well as a cost effective means of providing this healthcare.

    As for the endogeneity problem when it comes to developing nations, I believe that the arrow goes primarily from economic growth and development to health. Without growth and development, the level of specialization in order for doctors and a structured healthcare system to exist cannot be reached. The biggest reason for advances in life expectancy in developing nations have been aid (in the form of doctors, resources, and health information) from developed nations. The structured healthcare and leaps in life expectancy in these developed nations came after growth and development and have been passed on to developing nations.