IMF Economic Forum: Health, wealth, and welfare

• Pages: 146-148

Page 146

While one most often hears that longer life expectancies are the result of higher income and economic growth, Bio-Tchané said in opening remarks, the causality also runs in the other direction: better health indicators can contribute to higher economic growth and rising incomes. A two-way link between health and wealth highlights the terrible potential impact of HIV/AIDS-particularly in Africa, home to 30 million infected people accounting for 70 percent of cases worldwide.

Bio-Tchané explained that while the IMF's macroeconomic mandate does not directly involve health sector issues, the institution does respond to these issues in a number of ways, notably by providing countries with financial support that is intended partly to support health spending and improve health care and by providing technical assistance to ensure that public spending, including in the health sector, is effective and used for its intended purposes.

"Conceptually, it is obvious that healthier people are more productive and do better economically, but the new, surprising evidence is how strong this link is," Canning said. Putting this micro-level evidence together with strong evidence at the macro level that countries with healthier populations have higher economic growth rates confirms the key role health seems to play in generating economic development. And the role is important for a variety of reasons, Canning said. Healthy adults are more likely to be in the workforce, are more productive, and earn higher wages. A longer, healthier lifespan can lead people to save more for retirement. Health improvements lead to better schooling outcomes and test scores for children. And, while height in general is not closely associated with higher wages, estimated data show that for every extra centimeter in height induced by health care investments, a person's wage levels increase by 4-8 percent, he pointed out. These effects can be very large in developing countries. A survey of the extensive literature on the effects of health on output suggests that an extra year of life expectancy raises the steady-state level of income per capita by about 4 percent, Canning said.

Another indirect effect is the "demographic gift," or "demographic dividend." The increasing number of children that results from a falloff in infant mortality can have a profound effect on economies, according to Canning. Initially, this results in high...