From health to wealth Thorvaldur Gylfason What issue

From health to wealth Thorvaldur Gylfason

What issue? Good health is crucial to individual and social welfare around the world q q Health expenditure in OECD-area is nearly 600 euros per month for each family of four Education expenditure is similar Need to distinguish input from output 1. 2. 3. Expenditure is input into health care The output is the health care itself Output is key, input is not

Expenditure on health care Same applies to education Expenditure is a poor indicator of output because its efficiency is uneven Iceland: substantial hike in expenditure, but chronic shortage of health care q 1. Queues, central planning: inefficient Allocation of resources in health care could be made more efficient through market solutions 1. Greater efficiency means more and better care for given resources

Expenditure on health care Same applies to education Allocation of resources is more efficient in a market economy, requiring q q More private enterprise More competition between providers More allocation by price Keener awareness of cost Central planning is not an efficient way of securing greater social equality 1. There are better ways, through social

Public expenditure on health care 2001 (% of GDP) Iceland, with its young population, in first place within OECD Other Nordics, with older populations, near middle or below ution of p ib tr is d e g a r fo d te s Adju opula

Private expenditure on health care 2001 (% of GDP) US in class of its own Canada around average, behind Switzerland, Australia, and the Netherlands All Nordic countries below average ution of p ib tr is d e g a r fo d te s Adju opula

Total expenditure on health care 2001 (% of GDP) Composition varies greatly across countries q 1: 1 in US, Korea, and Switzerland q 1: 3 on average q 1: 6 in Nordic countries and Japan ution of p ib tr is d e g a r fo d te s Adju opula

Total expenditure on health care 2002 (% of GDP) Huge expenditures, with persistent upward trend due in part to medical progress Makes a difference how well these expenditures are managed Classic question of efficiency in allocation of scarce resources ibution of tr is d e g a r fo d te s ju d Not a popu

Health, human capital, and economic growth Good health is crucial to individual and social welfare around the world Does public health also matter for economic performance and growth? q q q Human capital is good for growth Education and health augment and improve human capital, and growth Living standards are determined by growth and nothing else, by definition

National income per capita Growth differentials Country B: 2% per year ü Economic system ü Economic policy ü Efficiency ü Health? Nearly threefold difference after 60 years Country A: 0, 4% per year 0 60 Years

Main determinants of growth I + + denotes positive effect + Adam Smith 1776 an m u h d n a l a it p a c l a ic s Phy wth capital are good for gro

Main determinants of growth II + + – denotes positive effect denotes negative effect tries n u o c r o o p t a th in a rt e Not c grow faster than rich

Main determinants of growth III + – – + denotes positive effect denotes negative effect + – tends e c n e d n e p e d e rc u o s Natural re ucation d e d n a t n e tm s e v in rt to hu

Main determinants of growth IV + – – + – denotes positive effect denotes negative effect + ? + – tter a m h lt a e h c li b u p s e o D for economic growth?

Birth care and national income r = rank correlation r = 0. 80 Luxembourg USA OECD Health and income go hand in hand 157 countries

Female education and birth care Education and health go hand in hand r = 0. 89 132 countries

Natural resource dependence and birth care Health is inversely related to r = -0. 62 primary production (and directly related to living standards) 163 countries

Birth care and growth Medical care is good for growth, even if the effects of education as well as ial income on it in r = 0. 50 growth are also taken into account Medical care is good for growth and vice versa 157 countries

Life expectancy and growth r = 0. 60 Medical care is good for growth Long lives are good for growth and vice versa Here, causation runs from life expectancy to growth 147 countries

Health expenditure and increase in n A economic growth health expenditure r = 0. 42 by 2. 5% of GDP goes along with an increase in growth per capita by 1% per year Health expenditure is good for growth and vice versa: Same story 163 countries

Reading the charts Growth Health = + Education Growth Education Health public d n a th w ro g th o b s lp e Education h d n a h in d n a h o g th w ro g health, so health and

Another interpretation Growth Health = + Education Growth Health Education good o ls a is h lt a e h d o o g d , an Education spurs growth and growth go hand in hand on ti a c u d e o s , th w ro g r fo

These slides are accessible on my website: www. hi. is/~gylfason In conclusion Health care, like education, helps build human capital Disease and ignorance impede economic growth d n E e Th Individual and social welfare depends mostly on human capital, not natural capital Public policy needs to encourage efficient allocation of resources in health care More market solutions, less central planning