When Does Improving Health Raise GDP? Comments on Ashraf, Lester, and Weil (2008).

Under what circumstances does improving health raise productivity? How quickly does this happen? And when is this payoff large or just a fizzle? These are the questions addressed by Ashraf, Lester, and Weil (ALW). They are important questions without doubt. In the empirical literature to date, estimates of the effect of health on output range from the extremely positive to the substantially negative. ALW's approach—which has numerous merits to it, especially on incorporating population into the analysis—points us to a fairly compact middle ground on these estimates. This conclusion has a certain aesthetic appeal, but in the end I think that such precise predictions are difficult because of limitations in their simulation model and uncertainties about numerous parameters. I discuss my reasoning and provide a few empirical examples below. The first theme of my comments is that health is multifaceted, and that the type of health change matters for economic outcomes. Consider the following different improvements in health: better sanitation reduces infant mortality; eradication of parasitic disease reduces childhood morbidity (sickness short of death); low-cost HIV medicine shrinks adult mortality; an arthritis treatment curtails old-age morbidity; improved treatments for pneumonia reduce old-age mortality. These are very different types of health improvements, and, intuitively, they will have different types of economic effects. An attempt to model all of health as a single index will run into trouble at some point. Most of ALW's results, however, are predicated on such a single-index assumption, linking health and human-capital changes via a series of reduced-form relationships. I am concerned that some of the undergirding reduced-form equations might buckle if we do not have the 100% correct model of health. All that said, the ALW framework might give the correct answer for the ‘average’ disease, but most diseases are not average. This last detail matters. Because of this heterogeneity, there is probably a much larger range of possible outcomes from health improvements than the bounds that ALW simulate in their ‘best case’ and ‘worst case’ scenarios. Moreover, the most obvious policy levers to push are not ones that improve general health, but instead are targeted at particular problems. Just like how Mister Wong and Professor Viner got to choose their lowest cost curve, so could we opt to intervene in a way skewed towards health improvements with higher payoffs. This means that the average returns from realized interventions would be higher than the return from treating the average disease. In this vein, I consider the specific case of malaria. I argue that ALW's simulation understates the long-run effect of malaria on income by at least an order of magnitude. First, while the acute symptoms of malaria are measured by ALW, the disease is also characterized by long bouts of subclinical morbidity that are poorly measured. Second, morbidity during childhood might depress human-capital formation, but ALW force this effect to work via years of schooling, which misses a lot and is itself a channel of second-order importance. Third, I review some of my recent estimates of the impact of childhood malaria exposure on adult income and find them to be considerably larger than ALW's simulations of the whole impact of malaria. Finally, I discuss ALW's results on population. The expected response of population to health depends crucially on (a) whether the improvement is for mortality or morbidity, and (b) how fertility responds to health. ALW's approach to fertility adjustment is seemingly comprehensive, but I provide below several examples of reasonably well identified studies that give results outside the range of their simulations. I suggest an alternative framework, but argue that further research is needed. Second, I discuss some limitations to ALW's Malthusian approach to population and income, especially in an urbanized and progressively integrating world. Third, I review studies that estimate general-equilibrium effects of health and find that the results of two out of three of them lie outside the range of ALW's best/worst simulations.