Study: “When Does Improving Health Raise GDP?”
PI(s): Ashraf, Quamrul H.
Co-PI(s): Lester, Ashley; Weil, David
Affiliation(s): Williams College
Institutional Partner(s): PRB Center
Methods: Simulation Model
Geographic Location(s): Cross-Country Analysis
The study assesses the effect of health improvements on output per capita using a simulation model that analyzes the direct effect of health on worker productivity as well as indirect effects such as schooling, size, and age-structure of the population; capital accumulation; and crowding of fixed natural resources. The results show that the effects of health improvements on income per capita are substantially lower than those that are often quoted by policymakers, and the period before any beneficial effects of an improvement in health are visible in GDP per capita can be long. When examining the economic effects of eradicating malaria and tuberculosis, results show that eliminating either condition in the typical country in sub-Saharan Africa would raise GDP per capita by only 2 percent in the long run. An increase in life expectancy at birth from 40 to 60 raises GDP per capita by about 15 percent in the long run. The results suggest that proponents of efforts to improve health in developing countries should rely on humanitarian arguments rather than economic ones.
Ashraf, Quamrul H., Lester, Ashley & Weil, David N.. (2008). When Does Improving Health Raise GDP? NBER Macroeconomics Annual 2008, 23, 157-204. Chicago: University of Chicago Press. DOI: 10.3386/w14449