[Health and growth: a brief review of the literature]

Improving health around the world is an important social objective, which provides direct payoffs in terms of longer and better lives. There is also a large consensus that improving health can have equally large indirect payoffs through accelerating economic development. The role that health conditions play in affecting growth is mainly analyzed via two channels: the direct labour productivity effect and the indirect incentive effect. The labour productivity hypothesis asserts that individuals who are healthier have higher returns to labour input. This is well tested in the empirical literature with mixed conclusions. The incentive effect is borne of the theoretical literature, and individuals who are healthier and have a greater life expectancy will have the incentive to invest in education as the time horizon over which returns can be earned is extended. Education is the driver of economic growth, and thus health plays an indirect role. Other minor channels have developed in the literature through which health affect economic development. However, although cross-country empirical works show a strong correlation between measures of health (for example, life expectancy) and economic growth, a causal effect of health and disease on economic development has not been established in the literature. A recent study challenges the view that different health conditions explain cross-country income differences. This study suggests that an improvement in mortality rate due to more effective public health measures and the introduction of new chemicals and drugs starting in the 1940s determines an increase in the population size which in turn reduces income per capita and economic growth.