How women’s health promotes economic growth

Over the last few years there has been an ongoing debate on the impact of health improvements on economic growth (e.g. WHO 2001, Acemoglu and Johnson 2007, Lorentzen et al. 2008). The report of the Commission on Macroeconomics and Health (WHO 2001) claims that health interventions in poor countries imply savings in terms of lost output that are high enough to vastly overcompensate for the associated initial investments. In this view, being healthier implies being wealthier. Skeptics, on the other hand, have argued that the growth rate of the population rises in case of a longer life expectancy induced by better health. They claim that this has negative repercussions on economic prosperity via capital dilution that outweigh the potential gains. Cervellati and Sunde (2011) show that the impact of increasing life expectancy on population growth crucially depends on its timing. While rising life expectancy may indeed increase fertility and population growth in the pre-demographic transition regime, it can even reduce fertility and population growth in the post-demographic transition regime. This implies that better health promotes economic growth and fosters development in countries that have already surpassed the demographic transition.

We show that there is another crucial dimension with respect to this argument – it matters whether health improves for women or for men. In the former case, development is promoted even in the pre-demographic transition regime, while in the latter case development is indeed slowed down. We therefore argue that targeting health investments on women rather than on men is a strong lever for development policy.

The mechanisms

Generally, the following channels are important for the differential effects on economic development between investments in women’s health and men’s health. Better health of fathers raises their productivity and thereby household income. The fact that the time burden of childcare in developing countries predominantly falls on mothers implies that the associated income effect with respect to having children is stronger than the substitution effect. This induces families to have more children in the pre-demographic transition regime (the Malthusian regime) if health improves for men only. The increase in fertility then leads to a postponement of the demographic transition, and, in consequence, also to a postponement of the takeoff toward sustained economic growth (Galor and Weil 2000). In the case of improvements in women’s health, however, more subtle and richer mechanisms are at work:

• Better health of mothers directly affects the health of their children through in utero effects and the mothers’ ability to breastfeed and nourish their children in other ways.

Better women’s health thereby improves development prospects through the direct intergenerational transmission of human capital (Bhalotra and Rawlings 2011).

• Healthier women are more able to participate productively in the labour market.

Since the vast majority of childcare in developing countries is provided by mothers, this implies that the opportunity costs of childcare increase by more in the case of improvements in women’s health than they would in the case of improvements in men’s health. This implies a stronger motive for households to reduce fertility (see Galor and Weil 1996), with a knock-on effect on educational investments via the well-known quality-quantity trade-off (Becker 1960).

• Fertility may also decline as a direct consequence of improved reproductive health, e.g. through the availability of contraceptives (Bhattacharya and Chakraborty 2014, Strulik 2014);
• Better health increases the returns to educational investments, in particular for girls who start with lower levels of education and lower labour-force participation.

The returns to education increase both through lower morbidity – allowing for greater labour market participation at the intensive margin – and lower mortality – affecting labour market participation at the extensive margin (Jayachandran and Lleras-Muney 2009).

The model and the results

In Bloom et al. (2015), we develop a micro-founded dynamic general equilibrium model that allows for a different health status of men and women, and that takes into account some of the outlined mechanisms through which improvements in women’s health can stimulate economic development. We use this model to study the conditions under which the economy switches from a low-growth regime, corresponding to a poverty trap with high fertility and no educational investments, to a modern sustained growth regime with declining fertility and increasing educational investments. We show that investments targeted solely at men’s health are likely to have negative effects on the timing of the demographic transition, the takeoff to sustained growth, and on the economic growth rate after the transition. By contrast, investments in women’s health speed up the demographic transition, the economic takeoff, and the post-transition rate of economic growth. While an equiproportional increase in the health of both sexes leaves the growth rate unaffected until the takeoff, it moderately raises it after the transition, a finding that is in line with the results reported by Cervellati and Sunde (2011). Furthermore, equiproportional health improvements help to speed up the economic transition.

At the same time, however, we show that unitary households would prefer improvements in men’s health over improvements in women’s health because of the higher static income gains. Our results therefore imply that there are crucial tradeoffs between the short-run interests of households and the long-run effects on economic development.

We use the framework to simulate the effect of a one percentage point increase in women’s health, corresponding to an increase of a little more than three healthy days per year. In a hypothetical less developed country with a latent time to transition of 52 years, this improvement in women’s health reduces the time to transition by five years and four months. By contrast, if there is a one percentage point increase in the health of both men and women, the reduction only amounts to three years and one month. Since achieving a one percentage point health improvement for both men and women is more expensive and less effective in promoting development, there is a strong case for targeting health policies at women.

Potential policies

Potential policies that target women’s health include the reduction of iodine deficiency, which has a more severe negative effect during pregnancy on the cognitive abilities of girls rather than boys (Field et al. 2009). Even moderate iodine deficiencies have been shown to reduce the IQ of children by 10-15 points (Shrestha and West 1994). A second promising policy in this regard is the vaccination against human papilloma virus to prevent cervical cancer, which is the second deadliest cancer among women in the developing world (Luca et al. 2014). The fact that cervical cancer is associated with a young average age of death, often for women who are raising children, makes this disease particularly dreadful. Luca et al. (2014) show that scaling up vaccinations over a ten-year horizon could prevent three million deaths. Finally, Jayachandran and Lleras-Muney (2009) show that policies targeted at reducing maternal mortality – such as improved access to maternal health care by means of additional facilities, more and better-trained staff, and providing crucial services for free – have a strong impact on investments in female education. Thus, a one-year increase in a girl’s life expectancy, following improvements in maternal health care in Sri Lanka in the 1950s, triggered an increase of 0.7 percentage points in literacy rates and an increase of 0.11 years in education for girls relative to boys.

Conclusions

Overall, our findings suggest a distinct role for development policies targeted at improvements in women’s health. With such improvements providing a greater stimulus toward economic development than gender-neutral health improvements, a targeted policy should be more cost-effective. In the face of limited financial resources, this should be in the interest of public and private donors alike. Furthermore, promoting female health helps to achieve other desirable targets apart from economic development, such as greater fairness in access to healthcare, promoting female empowerment, and improving the physical well-being of women and children in less developed countries. One can therefore hardly think of a policy that is more beneficial in such a multitude of dimensions than promoting women’s health. Altogether, in our view, this justifies that gender equality and female empowerment are central targets of the United Nations post-2015 Millennium Development Goals.

References

Acemoglu, D and S Johnson (2007), “Disease and Development: The Effect of Life Expectancy on Economic Growth”, Journal of Political Economy 115: 925-985.

Becker, G S (1960), “An Economic Analysis of Fertility”, in A J Coale (ed.) Demographic and economic change in developed countries, Princeton, NJ: Princeton University Press, pp. 209-240.

Bhalotra, S and S B Rawlings (2011), “Intergenerational persistence in health in developing countries: The penalty of gender inequality?”, Journal of Public Economics 95: 286-299.

Bhattacharya, J and S Chakraborty (2014), “Contraception and the fertility transition”, MPRA Discussion Paper, Munich.

Bloom, D E, M Kuhn, and L Prettner (2015), “The Contribution of Female Health to Economic Development”, NBER Working Paper 21411, National Bureau of Economic Research, Inc.

Cervellati, M and U Sunde (2011), “Life expectancy and economic growth: the role of the demographic transition”, Journal of Economic Growth 16: 99-133.

Field, E, O Robles, and M Torero (2009), “Iodine deficiency and schooling attainment in Tanzania”,American Economic Journal: Applied Economics 1: 140-169.

Galor, O and Weil, D (1996), “The Gender Gap, Fertility, and Growth”, The American Economic Review 86: 806-828.

Galor, O and D Weil (2000), “Population, technology, and growth: from Malthusian stagnation to the demographic transition and beyond”, The American Economic Review 90: 806-828.

Jayachandran S, and A Lleras-Muney (2009), “Life expectancy and human capital investments: evidence from maternal mortality declines”, The Quarterly Journal of Economics 124: 349-397.

Luca D L, J H Iversen, A S Lubet, E Mitgang, K H Onarheim, K Prettner and D E Bloom (2014), “Benefits and costs of the women’s health targets for the post-2015 development agenda”, Copenhagen Consensus Center Working Paper.

Lorentzen, P, J McMillan, and R Wacziarg (2008), “Death and development”, Journal of Economic Growth 13: 81-124.

Shrestha, R M, and C E West (1994), Role of Iodine in Mental and Psychomotor Development: An Overview, Wageningen, Netherlands: Grafisch Service Centrum.

Strulik, H (2014), “Contraception and development: A unified growth theory”, Discussion Papers on Business and Economics 07/2014, University of Southern Denmark.

WHO (2001). “Macroeconomics and Health Investing in Health for Economic Development”, Report of the Commission on Macroeconomics and Health, World Health Organization. Switzerland, Geneva.

This article is published in collaboration with VoxEU. Publication does not imply endorsement of views by the World Economic Forum.

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Author: David Bloom is Clarence James Gamble Professor of Economics and Demography in the Department of Global Health and Population, Harvard T.H. Chan School of Public Health. Michael Kuhn is Co-leader of the research group on population economics, Wittgenstein Centre (IIAS,VID/OEAW,WU) and Vienna Institute of Demography. Klaus Prettner is a Professor of Economics, University of Hohenheim.

Image: A nurse poses for a photo in a trauma center of the University of Mississippi Medical Center in Jackson. REUTERS/Jonathan Bachman