econ 355w - a. karaivanov lecture notes on population and ...akaraiva/week9 slides1.pdf · econ...

Econ 355W - A. Karaivanov Lecture Notes on Population and Growth

Chapter 8 notes — Human Capital: Education and Health (roughnotes, use only as guidance; more details provided in lecture)

• education and health are basic objectives of development but alsoimportant goals of themselves

• both are important for well-being and pre-requisites for achieving highereconomic productivity

• thus health and education (human capital) can be seen as an input tothe country’s production function

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• dramatic improvements in health and education since the 1950s(Gapminder)

• under-5 child mortality down from 28% to 11% (yet, only 0.7% in HICs)

• smallpox eradicated; childhood diseases (rubella, polio) controlled byvaccines

• huge expansion of literacy in developing countries (82% literate in 2004vs. 63% in 1970)

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• BUT, beyond these averages, high inequality in life-expectancyand education within LDCs remains; also levels still far from thosein developed countries

• 10 mln children can be saved per year if child death rates in LDCs areequal to those in HICs (remember Easterly ch. 1)

• schooling: a HIC child on average expects to receive 12 years of schoolingvs. 4 years for an LDC child (before taking into account school quality,teacher absenteesm, lack of textbooks, etc.)

• Education and Health as joint human capital investments (Box 8.2)

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1. both are investments made in the same individual

2. greater health may improve the return to education:

• — school attendance— being healthy is correlated with success in school and better learning— deaths of school-age children raise the cost of education per worker— longer life span raises the return (benefit) of investing in education!— healthier people are more able to productively use education at anypoint of life (which is longer too)

3. greater education capital may raise the return to investment inhealth:

• — many health programs require literacy, numeracy— schools can teach basic personal hygiene and sanitation— education needed for training and formation of health personnel— more educated people likely earn higher income — increases theincentives to invest in better health (more to lose)

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THE FACTS

Health measurement: typical measures are the under-5 mortality rateand life expectancy at birth

• life expectancy (fig. 8.8) — improving but setback in SSA (HIV/AIDS)(careful however, life expectancy not equivalent to good health)

• under-5 mortality (fig. 8.9) — reductions continue but become hardercompared to in the 1960s-1970s

• WHO uses the disability-adjusted life years (DALY) measure of health(some data issues but correlated with above measures)

• health inequality: there may be substantial differences in health betweenthe rich and poor (fig. 8.11)

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Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-23

Figure 8.8 Life Expectancy in Various World Regions


Figure 8.9 Under-5 Mortality Rates in Various World Regions


Figure 8.11 Children’s Likelihood to Die in Selected Countries


• health inputs are also very unequal — best hospitals are in urban,richer areas; if public clinics are available they are often underequipped,understaffed, underqualified; huge doctor absenteesm rates (30-40%)

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The disease burden

• box 8.3 gives a list of the major diseases in LDCs; the major ones are:

— absolute poverty (considered ‘disease’ by WHO)— malnutrition (root cause for many diseases, weakening the immunesystem); 800 mn estimated suffer malnourishment; 2 bln have somemicronutrient defficiency (e.g. iodine)

— AIDS — now leading cause of working-age adults in LDCs (especiallySSA)

— malaria — still kills more than 1 mln people per year; 70% childrenunder 5

— tuberculosis — 2 mln killed per year— parasitic diseases — due mostly to lack of access to clean water

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• 10 mln children die each year in LDCs (= 20% of all deaths worldwide);many of these deaths can be prevented for a few cents per child

• in at least 12 SSA countries a child is more likely to die than attendsecondary school

• huge impact on life-expectancy by the AIDS epidemic: in 2010, Nambia(70.1 estimated without AIDS vs. 38.9 with); Zimbabwe (69.5 vs. 38.8),Malawi (56.8 vs. 34.8).

• malnutrition - fig. 8.12 (but child obesity a real problem in HICs)

• diseases interact: malnutrition with all; malaria with respiratory diseasesor anemia; AIDS with TB.

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Figure 8.12 Proportion of Children under 5 Who Are Underweight, 1990 and 2005


HIV/AIDS

• HIV = human immuno-defficiency virus

• AIDS = acquired immuno-deficiency syndrome — the final and fatal stageof HIV infection

• In LDCs HIV transmitted mostly by heterosexual intercourse; also contactwith infected blood (drug abusers or in hospitals) and mother-childtransmission.

• average survival after AIDS sets in = 1 year

• more than 95% of all HIV cases in the world are in developing countries;2.9 mln died from it in 2006, most in SSA

• estimated infected: 40 mln worldwide with 25 mln in SSA (see Gapminderfor rates and Table 8.3); women a growing majority of infected

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Table 8.3 Regional HIV and AIDS Statistics, 2006


• average prevalence = 6% in 2006, but much higher in some countries(Swaziland 33.4%, see Gapminder for more data)

• fast transmission in SSA may be due to higher prevalence of otheruntreated STDs

• change in risky sexual behavior — may be less in SSA because of lowlife-expectancy (lower incentives)

• AIDS orphans (12 mln estimated in 2006); potential child-soldierproblems

• Uganda’s story (read box 8.4) — mass media campaigns and condom use

• treatment vs. prevention — the latter is much cheaper but historicallymuch of foreign aid resources focused on anti-retroviral treatments

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MALARIA

• 1 mln deaths per year, most among children or pregnant women

• can attribute to reduction in GDP growth (about 0.25% per year)

• the issue of vaccines for LDCs (why more are not invented given thehuge potential gains)

— free-riding: wait for others to spend resources on vaccine R&D— companies developing vaccines for diseases such as AIDS or malariafeel that if they succeed they will be politically pushed to sell them atlow prices — again, low incentives to do such R&D in private companies

— possible solution: a guaranteed price purchase agreement (financed bysponsors)

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PARASITIC WORMS and other ‘neglected’ tropical diseases

• estimated 2 bln people affected; 300 mln severely

• retards children growth and school performance (schistosomiasis)

• weakness and letargy caused in adults too

• ‘sleeping sickness’ and others — Table 8.4

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Table 8.4 The Major Neglected Tropical Diseases, Ranked by Prevalence


HEALTH AND PRODUCTIVITY

• poor health also harms the productivity of working-age people

• Cote d’Ivoire: evidence shows men who are likely to lose a day per monthdue to health issues earn 19% less than healthier men; reverse causalityruled out

• height as indicator of being healthy (fig. 8.13)

• if true, we should find that taller people earn higher incomes (fig. 8.14)

— indeed, true for Brazil - 1% taller = 7% more income— also in the USA: 1% taller = 1% more income— effects may start early in life: taller people found to receive moreeducation on average

• Thus, health is not only a major goal itself but has a significant impacton income in LDCs — health as pre-requisite for economic development

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Figure 8.13 Adult Stature by Birth Cohort


Figure 8.14 Wages, Education, and Height of Males in Brazil and the United States


HEALTH POLICY

• high efficiency of health provision can lead to high life-expectancy evenat relatively low incomes (fig. 8.15, Cuba)

• the distribution of health provision matters

• a WHO study on the health systems performance found USA to place36th after a few developing countries (some of the criteria used were‘distribution responsiveness’ and ‘fairness of financial burden’ of thesystem)

• seems to suggest that improvements can be obtained for the sameamount of money (although be careful of incentive effects — on R&D,queue lengths, etc.)

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Figure 8.15 GNI per Capita and Life Expectancy at Birth, 2002


• single-payer (tax funded) systems vs. out-of-pocket and private insurancehave their pros and cons but hard numbers like life-expectancy, etc. speakfor themselves

• subsidized training for doctors in LDCs — seems a good idea but what ifthey move to cities or emigrate?

• bad health and poverty vicious circle

• households may privately spend too little (from society’s perspective) onhealth as they ignore the negative externalities of being sick — a case forpublic systems

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econ 355w - a. karaivanov lecture notes on population and ...akaraiva/week9 slides1.pdf · econ...

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