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When Does Improving Health Raise GDP?

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Abstract

We assess quantitatively the effect of exogenous health improvements on output per capita. Our simulation model allows for a direct effect of health on worker productivity, as well as indirect effects that run through schooling, the size and age-structure of the population, capital accumulation, and crowding of fixed natural resources. The model is parameterized using a combination of microeconomic estimates, data on demographics, disease burdens, and natural resource income in developing countries, and standard components of quantitative macroeconomic theory. We consider both changes in general health, proxied by improvements in life expectancy, and changes in the prevalence of two particular diseases: malaria and tuberculosis. We find that the effects of health improvements on income per capita are substantially lower than those that are often quoted by policy-makers, and may not emerge at all for three decades or more after the initial improvement in health. The results suggest that proponents of efforts to improve health in developing countries should rely on humanitarian rather than economic arguments.

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Bibliographic Info

Paper provided by Brown University, Department of Economics in its series Working Papers with number 2008-7.

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Date of creation: 2008
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Handle: RePEc:bro:econwp:2008-7

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Postal: Department of Economics, Brown University, Providence, RI 02912

Related research

Keywords: Health; Human Capital; Life Expectancy; Disease Eradication; Fertility; Population Size; Age Structure; Captital Accumulation; Natural Resources; Income Per Capita;

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  1. David Weil, 2006. "Accounting for the Effect of Health on Economic Growth," DEGIT Conference Papers c011_031, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Ronald D Lee & Andrew Mason & Tim Miller, 1998. "Saving, Wealth, and Population," Working Papers 199805, University of Hawaii at Manoa, Department of Economics.
  3. Sebnem Kalemli-Ozcan, 2006. "AIDS, "Reversal" of the Demographic Transition and Economic Development: Evidence from Africa," NBER Working Papers 12181, National Bureau of Economic Research, Inc.
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  8. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  9. Daron Acemoglu & Simon Johnson, 2006. "Disease and Development: The Effect of Life Expectancy on Economic Growth," NBER Working Papers 12269, National Bureau of Economic Research, Inc.
  10. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  11. Adrienne M. Lucas, 2013. "The Impact of Malaria Eradication on Fertility," Economic Development and Cultural Change, University of Chicago Press, vol. 61(3), pages 607 - 631.
  12. Francesco Caselli & James Feyrer, 2006. "The Marginal Product of Capital," CEP Discussion Papers dp0735, Centre for Economic Performance, LSE.
  13. Gary D. Hansen & Edward C. Prescott, 1998. "Malthus to Solow," NBER Working Papers 6858, National Bureau of Economic Research, Inc.
  14. Alwyn Young, 2007. "In sorrow to bring forth children: fertility amidst the plague of HIV," Journal of Economic Growth, Springer, vol. 12(4), pages 283-327, December.
  15. Sebnem Kalemli-Ozcan, 2002. "Does the Mortality Decline Promote Economic Growth?," Macroeconomics 0212008, EconWPA.
  16. Alwyn Young, 2005. "The Gift of the Dying: The Tragedy of Aids and the Welfare of Future African Generations," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 423-466, May.
  17. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
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