Health
Health is something we consume, if we are healthy, we are happy, if you are sick all the time
you will be miserable. Health, in itself, is something to aspire for as a society and individual.
Why are health and education important?
Health, education, and infrastructure are all public goods
The effect provision of public goods is:
o A key determinant of quality of life (not measured in per capita income)
o A part of human capital investment (in OECD countries, investing in health is
a significant variable in GDP growth)
o Important plank of poverty reduction strategies (the rich can find private
alternatives, we must lobby for better services)
The market under provides these goods as prices do not fully reflect marginal social
benefit
o With private provision, there is market failure, even in a market such as the
US which underprovides, this leads to poor outcomes
State failure – poor organisation can lead to under-provision
o Often a lot of money can be spent but outcomes are still very poor
o Under provision continues, the poor suffer
o The poor in Brazil will not get anything from a state hospital
Traditional view equated public goods to government provision and ignored
government failure
There is a role for non-state, non-market institutions such as voluntary and
community organisations
World development report 2004:
Governments on average spend one third of their budget on health and education,
but little reaches the poor
The amount of hospital beds for example may be high, but the actual outcomes are
poor
Even when it is targeted to the poor, there is leakage (hard to measure extent – see
Olken, 2005), the money does not trickle down to the poor
Frictions in public service provision:
There is rampant absenteeism and poor-quality service (e.g., 74% of doctors are
absent in primary health care facilities in Bangladesh, 25% of teachers in India, and
40% of health providers in India)
o These are individuals with guaranteed jobs and a salary, there is no reason
for them to turn up, they are paid all the same
o Often when the teachers come there are no students and when the students
come there are no teachers
Tables from Kremer et al. “Missing in action: Teacher and health worker absence in
developing countries” (JEP, Winter 2006)
, Based on random inspection by a survey team (as opposed to attendance records at
the facility)
Absenteeism declines with income but is high at all levels
There are various correlates with absenteeism: male (+), union member (+), head
teacher (+), born in school district (-), school infrastructure (-), teacher recognition
program (-)
New teachers are likely to be placed in villagers where public schools are particularly
bad
Despite 25% absence rate of teachers for India, no teachers are fired and only less
than 1% head-teachers transferred
There are similar absence levels among health providers
The real puzzle is why people show up at all (no punishment, get paid staying at
home)
Benefits from improving health:
Will improving health help the economy? We need to try and find hard evidence for this.
Improving health can improve growth
Countries with intensive malaria had income levels in 1995 of only 33% that of
countries without malaria, whether the countries were in Africa or not
o If you get rid of malaria, you improve the health of the country and the
economy too
Is there higher incidence of malaria in poorer countries? Where does the causality
lie? Is the incidence of malaria higher because poor countries are dirtier?
Malaria is geographically specific (hot and humid), so incidence of malaria is
exogenous
Cross-country regressions for 1965-1990, taking into account initial poverty,
economic policy, tropical location, and life expectancy, among other factors,
countries with intensive malaria grew 1.3% less per person per year, and a 10%
reduction in malaria was associated with 0.3% higher growth (Gallup and Sachs,
(2001))
o This paper became very famous,
B&M Gates foundation looked at it
etc…
The darker areas show the areas with the highest
malaria incidence and risk. If we take the darkest
colours to signify higher GDP, the colours are
effectively inversed.
Acemoglu and Johnson (2007) find there is no evidence that the large increase in life
expectancy raised income per capita. There is a strong correlation between measures of
health and the level of economic development, but this is not necessarily causality. Health
Health is something we consume, if we are healthy, we are happy, if you are sick all the time
you will be miserable. Health, in itself, is something to aspire for as a society and individual.
Why are health and education important?
Health, education, and infrastructure are all public goods
The effect provision of public goods is:
o A key determinant of quality of life (not measured in per capita income)
o A part of human capital investment (in OECD countries, investing in health is
a significant variable in GDP growth)
o Important plank of poverty reduction strategies (the rich can find private
alternatives, we must lobby for better services)
The market under provides these goods as prices do not fully reflect marginal social
benefit
o With private provision, there is market failure, even in a market such as the
US which underprovides, this leads to poor outcomes
State failure – poor organisation can lead to under-provision
o Often a lot of money can be spent but outcomes are still very poor
o Under provision continues, the poor suffer
o The poor in Brazil will not get anything from a state hospital
Traditional view equated public goods to government provision and ignored
government failure
There is a role for non-state, non-market institutions such as voluntary and
community organisations
World development report 2004:
Governments on average spend one third of their budget on health and education,
but little reaches the poor
The amount of hospital beds for example may be high, but the actual outcomes are
poor
Even when it is targeted to the poor, there is leakage (hard to measure extent – see
Olken, 2005), the money does not trickle down to the poor
Frictions in public service provision:
There is rampant absenteeism and poor-quality service (e.g., 74% of doctors are
absent in primary health care facilities in Bangladesh, 25% of teachers in India, and
40% of health providers in India)
o These are individuals with guaranteed jobs and a salary, there is no reason
for them to turn up, they are paid all the same
o Often when the teachers come there are no students and when the students
come there are no teachers
Tables from Kremer et al. “Missing in action: Teacher and health worker absence in
developing countries” (JEP, Winter 2006)
, Based on random inspection by a survey team (as opposed to attendance records at
the facility)
Absenteeism declines with income but is high at all levels
There are various correlates with absenteeism: male (+), union member (+), head
teacher (+), born in school district (-), school infrastructure (-), teacher recognition
program (-)
New teachers are likely to be placed in villagers where public schools are particularly
bad
Despite 25% absence rate of teachers for India, no teachers are fired and only less
than 1% head-teachers transferred
There are similar absence levels among health providers
The real puzzle is why people show up at all (no punishment, get paid staying at
home)
Benefits from improving health:
Will improving health help the economy? We need to try and find hard evidence for this.
Improving health can improve growth
Countries with intensive malaria had income levels in 1995 of only 33% that of
countries without malaria, whether the countries were in Africa or not
o If you get rid of malaria, you improve the health of the country and the
economy too
Is there higher incidence of malaria in poorer countries? Where does the causality
lie? Is the incidence of malaria higher because poor countries are dirtier?
Malaria is geographically specific (hot and humid), so incidence of malaria is
exogenous
Cross-country regressions for 1965-1990, taking into account initial poverty,
economic policy, tropical location, and life expectancy, among other factors,
countries with intensive malaria grew 1.3% less per person per year, and a 10%
reduction in malaria was associated with 0.3% higher growth (Gallup and Sachs,
(2001))
o This paper became very famous,
B&M Gates foundation looked at it
etc…
The darker areas show the areas with the highest
malaria incidence and risk. If we take the darkest
colours to signify higher GDP, the colours are
effectively inversed.
Acemoglu and Johnson (2007) find there is no evidence that the large increase in life
expectancy raised income per capita. There is a strong correlation between measures of
health and the level of economic development, but this is not necessarily causality. Health
