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Monday, November 1, 2010

Why Do Development Economists Care About Health? And Why Should Doctors Care About Economics?

MethodLogical’s contributors span a wide range of disciplines, but mine might be the oddest of the bunch. What, you might wonder, does economics have to do with global health? Somewhat surprisingly, the answer is “a whole lot”, and in two distinct ways. The first, and most obvious, is that people’s economic status determines their health outcomes. But things also go the opposite direction: health governs economic success or failure, and we’re beginning to learn that the magnitude of that effect is very large.

That poverty can lead to poor health is in some sense obvious. If anti-retroviral treatment costs $1500/year, HIV patients in Malawi, where the mean income per person is $336/year (and the median even lower), are not going to get the drugs they need to survive without outside help. This basic arithmetic was one of the fundamental reasons I first got interested in development economics. However, the apparently simple link from poverty to health isn’t actually that simple: a rise in income does not always lead to the investments in healthcare that we’d expect. To take one example, many poor people around the world are malnourished, but surprisingly when they get more income even the calorie-deprived don’t appear to consume more food.

In the opposite direction there’s an emerging consensus in the economics literature that public health improvements have played a major role in the economic growth that has led millions out of poverty. On the macro scale, there is the “disease burden” hypothesis that argues that brain development is negatively impacted by childhood illness, depressing intelligence, wages and other economic indicators for a person’s entire life. Hoyt Bleakley has argued persuasively that hookworm eradication in the 1910s was responsible for income gains of as much as 50% in the American South, and a recent study has shown that the overall disease burden on a society has a significant negative impact on average IQ. But we don’t fully understand this mechanism yet. In a microempirical study, Miguel and Kremer found that a school de-worming program in Kenya significantly decreased absenteeism, but they didn’t find an effect on actual test scores.

The fact that causality runs both ways makes the link between poverty and health a fascinating and tricky issue to study. We get to use sexy statistical tricks like regression discontinuities and instrumental variables, or even the statistician’s dream of a randomized controlled trial, better known as a field experiment.

Global health turns out not just to be big-picture important for economic outcomes (and also vice versa) but also to involve some very interesting economics. I’ve hinted at some of the open questions and outright mysteries in this area, and I’ll talk about them more in future posts. I’ll also talk about my own research that touches on health, which is about how people make maybe the most important decision imaginable: whether, and how, to protect themselves from death, specifically death due to HIV.


  1. Kerwin- interesting stuff. I'm curious about the use of mean annual income as a marker of ability to afford drugs (i.e., ART). I would imagine many Americans couldn't afford their drugs out of pocket (hence Medicare Part D). I assume mean income is somewhat of a proxy for a nation's GDP and non-foreign aid revenues, which probably says a lot about a country's ability to provide drugs for its people. But, if we control for this confounder, I wonder how useful income is as a measure when such services really should be provided by the government (or other international actors), a point to which I think you allude.

  2. Calling that figure "income" is perhaps a little misleading - it's nominal GDP/person, which as you point out represents the total capacity of the country to buy goods on the international market. So if we keep our focus on Malawi alone, the fact that the government should step in doesn't matter for my argument - they can't afford to. The implication is that it's incumbent on international actors to do something, whether that's providing the drugs or trying to work to alleviate poverty more generally.

    The reason I refer to it as mean income is because even the part of GDP that technically accrues to corporations belongs to the people that own them. But that highlights the fact that it's a mean, and skewed upward by rich people with lots of income. This awesome report from 2006 indicates that the median income was somewhere around 20,000 Kwacha, or roughly $133 at current exchange rates.


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