Health, immunization and economic growth

Research Briefing 1:

Health and Economic Growth

Common sense might suggest that a healthy person is likely to be more productive than an unhealthy one, both in paid work and in the maintenance of a home and the raising of healthy children. But for years, hard evidence to support that common sense remained elusive. Now, the situation is changing. Two broad types of research point to an increasingly clear link between improvements in people’s health and economic growth. The first type of research is the comparison of different countries’ performance over time, using indicators such as mortality rates and gross domestic product (GDP). The second type of research is at the level of households and individuals, investigating the links between people’s health and their productivity and earnings.

International comparisons

Researchers have long tried to disentangle the factors that might account for the wide variations in per-capita income between different countries. They have analysed the impact of factors such as education levels and training investments, and shown, for example, that the more educated a population, the better its income. Surprisingly, perhaps, they have until recently paid less attention to the effects of health improvements. As data have improved during the 1980s and 1990s, however, it is becoming increasingly clear that a real relationship exists between a nation’s burden of disease and its income ⁽¹⁾.

One key indicator of a population’s health status is life expectancy—the age to which a newborn baby can expect to survive. Life expectancy at birth has increased sharply worldwide over the past half-century, but remains below 50 years in many of the world’s poorest countries where the burden of infectious diseases remains heavy. Recent studies have shown that life expectancy, or survival rate, is a powerful predictor of income level and of economic growth. For example, an analysis of data for 53 countries between 1965 and 1990 found that overall, the improvement in adult survival rates was responsible for about eight per cent of total growth ⁽²⁾ . The researchers who performed this analysis suggest that three broad mechanisms are responsible for this effect: (a) improvements in productivity due to a healthier workforce and less absenteeism; (b) the increased incentives that both individuals and firms have to invest in human and physical capital as life expectancy increases; and (c) the increase in savings rates, as workers have an incentive to save for retirement.

In Mexico, studies supported by the Pan American Health Organization, the Inter-American Development Bank and others have added further weight to the evidence. The studies indicate that, if male life expectancy increases by one year, the gross domestic product of the country will be increased by an additional 1 per cent after 15 years ⁽¹⁾ .

Another health indicator that is correlated with economic performance across countries is the total fertility rate, or birth rate. As a population’s health improves, more of its infants and young children survive. This tends to lead, over time, to a fall in fertility rates. Several studies have shown that, soon after crude birth rates fall, economic growth increases, as the proportion of the population participating in the labour force swells. Of course, this "bulge" in the structure of a national population, leading to a temporary "demographic gift" of young adults, does not automatically lead to growth, nor is growth necessarily permanent. In East Asia, a rapid decline in infant mortality in the 1940s and a subsequent fall in fertility led to a rapid relative increase in the number of adults of working age in the region’s population, compared with the very young and very old. One study suggests that between one-third and one-half of the region’s growth during the period 1965 to 1990—its "economic miracle"—may have been due to these demographic changes. ⁽³⁾ Some researchers now argue that subsequent population aging is contributing to the recession in East Asia.

Climate, through its effects on health, may also influence economic development. Several lines of evidence indicate that countries in tropical regions are at an economic disadvantage, in part because of endemic malaria. Although much more work is needed to measure more precisely the effects of malaria on national economies, one study questions whether malaria may be a cause of poverty as much as a consequence of it. In countries where a high proportion of the population is at risk of severe malaria, measured on a standard index, average income per capita in 1995, adjusted for purchasing power, was less than one-fifth that of non-malarial countries. Income growth per capita since the mid-1960s for countries with severe malaria has been only 0.4 per cent per year, compared with 2.3 per cent in other countries—a difference of more than fivefold. ⁽⁴

Households and individuals

In the world’s poorer countries, the burden of infectious diseases and malnutrition remains heavy and falls disproportionately on children. Five major childhood conditions—diarrhea, pneumonia, malaria, measles and perinatal conditions—are between them responsible for more than one-fifth of all deaths in low-income and middle-income countries ¹ . Researchers are now beginning to ask whether these conditions, which are found almost exclusively among the world’s poor, may also have a personal and economic impact on survivors. Adults’ health may suffer the longterm effects of childhood illness and malnutrition—such as blindness or stunting. And parents whose children are repeatedly sick, for example from malaria, may be less able to work efficiently and hold down jobs.

Studies of the economic impact of household health are difficult to do and their broad conclusions were initially unclear. But with increasing sophistication, these studies have begun to show a consistent pattern. A review of the literature finds that sick workers are absent from work more than healthy workers, even when they are self-employed. And, on balance, the review concludes, some dimensions of health do clearly affect workers’ productivity ⁽⁵⁾ .

The effects of ill health on individual productivity appear to be greater in poor populations than in rich ones. This is partly because of the typical nature of poorer people’s work. Poorer and less educated individuals are more likely to have jobs that require physical fitness and stamina, while more affluent and educated individuals’ jobs may be more sedentary.

A growing number of studies suggest that health does influence earnings. In Brazil, for example, one study found that a 1 per-cent increase in men’s height—a measure that partly reflects childhood health and nutrition—was associated with an increase of almost 8 per cent in wages. Taller men—and also women—were also more likely to participate in the labour force than shorter men and women. While no one claims that the relationship between height and income should be interpreted simplistically, the findings do suggest that a healthy childhood may have at least some bearing on adult productivity in poorer economies. Also, some studies suggest that in malnourished adults, a change to a diet with higher calories and greater protein content results in increased productivity.

The relationship between people’s health and their earnings must be studied more thoroughly and on a larger scale before researchers can reach precise conclusions about how these two factors interact. But, compared with even a decade ago, there is now increasingly robust evidence that improvements in the health of the poorest households can provide an escape route out of the poverty trap.

References

1. World Health Report, 1999: Making a Difference. WHO 1999.

2. Jamison DT, Lau LJ, Wang J. Health’s contribution to economic growth, 1965-90. IN: Health, Health Policy and Economic Outcomes. Health and Development Satellite, Final Report.WHO Director-General Transition Team, 1998.

3. Bloom DE, Williamson JG. Demographic transitions and economic miracles in emerging Asia. The World Bank Economic Review, 1998, 12(3): 419-455

4. Gallup JL and Sachs JD. The Economic Burden of Malaria: Cross-Country Evidence. IN Health, Health Policy and Economic Outcomes. Health and Development Satellite, Final Report.WHO Director-General Transition Team, 1998.

5. Strauss J and Thomas D. Health, Nutrition and Economic Development. Journal of Economic Literature. Vol XXXVI (June 1998) 776-817.

Topics:

A summary of the research evidence showing that improved health has economic benefits

A summary of some recent studies on the cost-effectiveness of immunization as a health intervention

Links to other sources in health and economic development