Health and Economic Growth

This chapter examines the relationship between health and economic growth. Across countries, income per capita is highly correlated with health, as measured by life expectancy or a number of other indicators. Within countries, there is also a correlation between people’s health and income. Finally, over time, the historical evolution of cross-country health differences has largely paralleled the evolution of income differences, with the exception that in the last half century the convergence of health has been much faster than the convergence of income. How are health and income related? Theoretically, there is good reason to believe that causality runs in both directions. Healthier individuals are more productive, learn more in school, and, because they live longer, face enhanced incentives to accumulate human capital. Similarly, higher income for individuals or countries improves health in a variety of ways, ranging from better nutrition to construction of public health infrastructure. Empirically, there is evidence for both of these causal channels being operative, but the magnitude of the effects is limited, at least as they apply to cross-sectional differences among countries or individuals. Apparently, other factors that simultaneously raise income and improve health outcomes, such as institutional quality (for countries) and human capital (for individuals), are responsible for a good deal of the observed health–income correlation. The final section of the chapter discusses measures of aggregate welfare that combine consumption and life expectancy.