Saturday, July 15, 2006

Health and Wealth

I have been attending the NBER Summer Institute this week. The most fascinating hour of the week for me so far has been Daron Acemoglu's presentation of his paper "Disease and Development: The Effect of Life Expectancy on Economic Growth."

From the abstract:

What is the effect of increasing life expectancy on economic growth? To answer this question, we exploit the international epidemiological transition, the wave of international health innovations and improvements that began in the 1940s.... The instrumented changes in life expectancy have a large effect on population; a 1% increase in life expectancy leads to an increase in population of about 1.5%. Life expectancy has a much smaller effect on total GDP both initially and over a 40-year horizon, however. Consequently, there is no evidence that the large exogenous increase in life expectancy led to a significant increase in per capita economic growth. These results confirm that global efforts to combat poor health conditions in less developed countries can be highly effective, but also shed doubt on claims that unfavorable health conditions are the root cause of the poverty of some nations.
The bottom line: Even if reformers (such as Jeff Sachs and Bill Gates) succeed in their admirable goal of promoting better health in poor countries, we should not expect that success to fix the problem of persistent poverty.