Health, lifespan and economic activity: why poor nations remain poor and rich nations rich

The level of health attained by a nation's citizens will affect their economic behavior in many important respects. We focus on one of these - the effect of health on expected lifespan. When individuals expect to live for a longer period of time, they plan accordingly earlier in their lives. Specifically, longer-lived individuals have a greater incentive early in life to devote a larger and perhaps longer portion of their time to human capital accumulation. This can take the form of a longer schooling period, greater attention to studying while at school, or a greater willingness to engage in an apprenticeship or other low-wage learning-by-doing work. The incentive to learn is perhaps more important in the learning process than more easily measured items such as school attendance. We apply this analysis to the long-standing puzzle of why some nations have remained permanently in a state of underdevelopment and impoverishment. We demonstrate that expected lifespan can affect income levels, and we note that income levels can affect health and thereby lifespan. This mutual dependence can cause rich countries to remain rich and poor nations to remain poor. If the analysis is valid, there are important policy implications including: public health expenditures can have very long-term benefits; health resources directed at older citizens can contribute to economic development; and without adequate health and concomitant lifespan, individuals will not have sufficient incentive to take advantage of educational opportunities no matter how many resources are made available to them.