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

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1 Chapter 8 notes Human Capital: Education and Health (rough notes, use only as guidance; more details provided in lecture) education and health are basic objectives of development but also important goals of themselves both are important for well-being and pre-requisites for achieving higher economic productivity thus health and education (human capital) can be seen as an input to the country s production function 1

2 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 by vaccines huge expansion of literacy in developing countries (82% literate in 2004 vs. 63% in 1970) 2

3 BUT, beyond these averages, high inequality in life-expectancy and education within LDCs remains; also levels still far from those in developed countries 10 mln children can be saved per year if child death rates in LDCs are equal to those in HICs (remember Easterly ch. 1) schooling: a HIC child on average expects to receive 12 years of schooling vs. 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) 3

4 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 any point of life (which is longer too) 3. greater education capital may raise the return to investment in health: 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 the incentives to invest in better health (more to lose) 4

5 THE FACTS Health measurement: typical measures are the under-5 mortality rate and 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 harder compared 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 between the rich and poor (fig. 8.11) 5

6 Figure 8.8 Life Expectancy in Various World Regions Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-23

7 Figure 8.9 Under-5 Mortality Rates in Various World Regions Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-24

8 Figure 8.11 Children s Likelihood to Die in Selected Countries Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-26

9 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%) 6

10 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 immune system); 800 mn estimated suffer malnourishment; 2 bln have some micronutrient defficiency (e.g. iodine) AIDS now leading cause of working-age adults in LDCs (especially SSA) malaria still kills more than 1 mln people per year; 70% children under 5 tuberculosis 2 mln killed per year parasitic diseases due mostly to lack of access to clean water 7

11 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 attend secondary school huge impact on life-expectancy by the AIDS epidemic: in 2010, Nambia (70.1 estimated without AIDS vs with); Zimbabwe (69.5 vs. 38.8), Malawi (56.8 vs. 34.8). malnutrition - fig (but child obesity a real problem in HICs) diseases interact: malnutrition with all; malaria with respiratory diseases or anemia; AIDS with TB. 8

12 Figure 8.12 Proportion of Children under 5 Who Are Underweight, 1990 and 2005 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-29

13 HIV/AIDS HIV = human immuno-defficiency virus AIDS = acquired immuno-deficiency syndrome the final and fatal stage of HIV infection In LDCs HIV transmitted mostly by heterosexual intercourse; also contact with infected blood (drug abusers or in hospitals) and mother-child transmission. 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 Gapminder for rates and Table 8.3); women a growing majority of infected 9

14 Table 8.3 Regional HIV and AIDS Statistics, 2006 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-27

15 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 other untreated STDs change in risky sexual behavior may be less in SSA because of low life-expectancy (lower incentives) AIDS orphans (12 mln estimated in 2006); problems potential child-soldier Uganda s story (read box 8.4) mass media campaigns and condom use treatment vs. prevention the latter is much cheaper but historically much of foreign aid resources focused on anti-retroviral treatments 10

16 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 the huge potential gains) free-riding: wait for others to spend resources on vaccine R&D companies developing vaccines for diseases such as AIDS or malaria feel that if they succeed they will be politically pushed to sell them at low prices again, low incentives to do such R&D in private companies possible solution: a guaranteed price purchase agreement (financed by sponsors) 11

17 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

18 Table 8.4 The Major Neglected Tropical Diseases, Ranked by Prevalence Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-30

19 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 month due to health issues earn 19% less than healthier men; reverse causality ruled 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 more educationonaverage Thus, health is not only a major goal itself but has a significant impact on income in LDCs health as pre-requisite for economic development 13

20 Figure 8.13 Adult Stature by Birth Cohort Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-32

21 Figure 8.14 Wages, Education, and Height of Males in Brazil and the United States Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-33

22 HEALTH POLICY high efficiency of health provision can lead to high life-expectancy even at relatively low incomes (fig. 8.15, Cuba) the distribution of health provision matters a WHO study on the health systems performance found USA to place 36th after a few developing countries (some of the criteria used were distribution responsiveness and fairness of financial burden of the system) seems to suggest that improvements can be obtained for the same amount of money (although be careful of incentive effects on R&D, queue lengths, etc.) 14

23 Figure 8.15 GNI per Capita and Life Expectancy at Birth, 2002 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 8-34

24 single-payer (tax funded) systems vs. out-of-pocket and private insurance have their pros and cons but hard numbers like life-expectancy, etc. speak for themselves subsidized training for doctors in LDCs seems a good idea but what if they move to cities or emigrate? bad health and poverty vicious circle households may privately spend too little (from society s perspective) on health as they ignore the negative externalities of being sick a case for public systems 15