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Sunday, July 16, 2006



These conclusions hold depending on how we define (persistent) poverty. Anyway, there is not doubt that health improvements are a good proxy for welfare.

Arthur Eckart

The paper shows longer life expectancy, health improvements, or greater population actually reduces per capita income. The paper suggests capital, in a production function, will generate increasing returns to scale in Third World countries. So, to improve health and reduce poverty, some proportion of the limited resources should be invested in production.

Acemoglu: ... there is no evidence that the large exogenous increase in life expectancy led to a significant increase in per capita economic growth.

Interesting finding, but it's counterintuitive.

In the world of abject poverty, this may be the case since subsistence is agricultural based. Meaning that once too old to farm the land, one becomes dependent upon the next generation to assume the responsibility, and the elders depend upon them. Which is why such countries have such relatively high birth rates, despite poverty.

But, in a modern, developed country ... well, it just doesn't seem right.

If life spans extend to 80 years (give or take a few years) and if one has had a retirement pension for 15 of those years, with the mortgage paid and no expenditure on raising a family, then savings accrue.

These savings of the elderly become inheritance and, as such, increase personal net worth of the next generation. That can not but increase economic activity, even if also left in a savings account and not invested - which I suspect seriously is not the case. The next generation, younger, more eager, will want a better return on their money in order to better spend it.

Unless, someone sees, intuitively, something else happening to sustain the cited "finding"?

Plamen Nikolov, Harvard University

A major deficiency in Daron Acemoglu's study is his chosen period. He starts tracking life expectancy changes in 1940 and their effect on economic growth. Incidentally, by the mid 1940's antibiotics were available for treatment against many bacterial infections including strep throat, pneumonia, skin infections, wound infections, scarlet fever, toxic shock syndrome and other bacterial infections. It is not obvious to me how one can make a case that this period can easily generalize to other ones and conclude that life expectancy improvements have no effect on economic growth.

Arthur Eckart

Plamen, longer life expectancy has a positive and significant effect on aggregate income. However, it has a negative, neutral, or uncertain effect on per capita income. Why would you assume longer life expectancy has a positive and significant effect on per capita income?

Plamen Nikolov, Harvard University

Dear Arthur,

First of all, there are several ways to measure health (or improvements in health) on the population level. Measures include life expectancy, disability adjusted life expectancy, disability adjusted life years, and quality-adjusted life years. I think life expectancy is the most imperfect measure of population health (quality of health is not a strictly monotone increasing function of life expectancy), but since this is the variable used in the originally discussed paper, I, too, will focus on that one.

Economic growth is a function of changes in wealth and changes in total populaton. Total population itself changes as a function of changes in fertility and changes in mortality. Everything else constant, higher fertility will increase population growth. Higher mortality (life expectancy is by definition an arithmetic mean: the integral of the survival curve, or mortality patterns, from ages 0 to the maximum lifespan) will decrease population growth, everything else constant.

As you yourself note, longer life expectancy has a significant and positive effect on aggregate wealth. On the population side, the effect of life expectancy is more empirically ambiguous. Jie Jing and Junsen Zhang (2005) use a 76-country dataset and find a statistically negative effect of life expectancy on fertility. The issue of whether the increase in aggregate wealth is larger than the increase in total population, the two components of the income per capita ratio, is still largely empirically unsettled. Using a production method approach, David Bloom and David Canning (2003) find that good health has a positive, sizable, and statistically significant effect on aggregate output even when they control for experience of the workforce. They argue that the life expectancy effect in growth regressions appears to be a real labor productivity effect, and is not the result of life expectancy acting as a proxy for worker experience.

In a more recent paper, David Weil (2006) uses an anthropomorphic measure of health and also finds a statistically significant and positive effect of health on economic growth.

Basically, as of now, there exists considerable controversy regarding how important health is as a determinant of economic growth. At one end of the spectrum are those who claim that disease is the most important factor constraining growth in many poor countries, so that a successful intervention to fight disease would produce a large economic benefit (Bloom, Canning, Cutler, Jamison and Kremer). At the other end of the spectrum are those who argue that disease eradication, while hugely valuable in humanitarian terms, has historically had no effect on GDP per capita (Acemoglu and Johnson). I think the literature is increasingly showing more empirical evidence in favor of the first group, but there is still no consensus on the issue.

Arthur Eckart

Plamen, I appreciate your comments. However, the study above shows longer life expectancy has a negative effect on per capita income. The study concludes: "a 1% increase in life expectancy leads to an increase in population of about 1.5%. Life expectancy has a much smaller effect on total GDP both initially and over a 40-year horizon, however." So, there's a positive effect on aggregate income, but a negative effect on per capita income. It seems, improving health (e.g. lower infant mortality and longer lives) has helped fuel the "population explosion" (along with fewer massive plagues and wars). It should also be noted, the root cause of most major environmental problems, e.g. deforestation, air & water pollution, plant & animal extinctions, etc. can be contributed to the population explosion. Below is a link with further information:

The Population Explosion by Carolyn Kinder 1998

Until recently (before the Industrial Revolution), birth rates and death rates were about the same, keeping the population stable. People had many children, but a large number of them died before age five.

In the past, infant and childhood deaths and short life spans used to limit population growth. In today's world, thanks to improved nutrition, sanitation, and medical care, more babies survive their first few years of life. The combination of a continuing high birth rate and a low death rate is creating a rapid population increase in many countries in Asia, Latin America and Africa and people generally lived longer. Over-population is defined as the condition of having more people than can live on the earth in comfort, happiness and health and still leave the world a fit place for future generations.What some people now believe that the greatest threat to the future comes from overpopulation.

It took the entire history of humankind for the population to reach 1 billion around 1810. Just 120 years later, this doubled to 2 billion people (1930); then 4 billion in 1975 (45 years). The number of people in the world has risen from 4.4 billion people in 1980 to 5.8 billion today (1998). And it is estimated that the population could double again to nearly 11 billion in less than 40 years. This means that more people are now being added each day than at any other time in human history.

Looking ahead, world population is projected to exceed 6 billion before the year 2000. And according to a report by the United Nation Population fund, total population is likely to reach 10 billion by 2025 and grow to 14 billion by the end of the next century unless birth control use increases dramatically around the world within the next two decades. Both death rates and birth rates have fallen, but death rates have fallen faster than birth rates. There are about 3 births for each death with 1.6 births for each death in more developed countries (MDCs) and 3.3 births for each death in less developed countries (LDCs). The world's population continues to grow by 1 billion people every dozen years.

Plamen Nikolov, Harvard University

Dear Arthur,

I am puzzled that you continue to cite from the above study when I clearly pointed out what its strong deficiency was...it uses data from years right after the antibiotic revolution. I am assuming your doctoral training is in economics as well (is it?) so you can easily deduce what choosing such a study period in empirical terms will mean for its results' generalizability. But I suppose I was wrong in my assumption? Please correct if you I incorrectly assumed you are an economist. Your last three paragraphs are even more disturbing. Suddenly, you seem to be adopting a normative perspective by your "the root cause of most major environmental problems can be contributed to the population explosion...and health improvements". Some studies, such as Lee, Chun and Kim (2007) even find (though in some ways the study bears some of the flaws of Acemoglu's one) a positive effect of education on population in Korea. Given what you wrote in your last post, I almost don't want to know what you would be whispering in the ears of Korean policy makers if you base your policy prescription on such results.

Arthur Eckart

Plamen, apparently, there were many medical revolutions. In the History of Medicine, it states: "The decline in many of the most lethal diseases was more due to improvements in public health and nutrition than to medicine," which seems to support the statement in the Population Explosion: "In today's world, thanks to improved nutrition, sanitation, and medical care, more babies survive their first few years of life." So, I'm not sure the data period is a "strong deficiency." It's uncertain how much beginning in 1940 would skew the regression. However, presumably, infectious diseases would more likely kill the weak (e.g. children and the elderly) and the poor (i.e. below a poverty line). So, it seems, life expectancy on per capita income would be negative. Nonetheless, a later period would be of interest.

You stated: "I think the literature is increasingly showing more empirical evidence in favor of the first group, but there is still no consensus on the issue." So, I don't know "what you would be whispering in the ears of Korean policy makers." From the evidence I've seen (although, it isn't much), it would seem birth control, immigration policy, and other factors to increase per capita income (because of questionable causality of health on per capita income or education).

The Population Explosion information is not normative, it's interrelated. You also stated you tend to believe: "A successful intervention to fight disease would produce a large economic benefit." I think, it's also important to take social costs into account, particularly in Third World countries. After all, you want to fit the pieces together, since there's no general equilibrium model. Yes, I have degrees in Economics, where I specialized in Money & Banking and International Trade.

Arthur Eckart

Also, I may add, Greg Mankiw, a professor of economics at Harvard University, didn't point out a "strong deficiency" and made the following comment about the paper: "The bottom line: Even if reformers (such as Jeff Sachs and Bill Gates) succeed in their admirable goal of promoting better health in poor countries, we should not expect that success to fix the problem of persistent poverty."

So, it seems, other factors have more influencial effects on raising per capita income. I wouldn't say a larger population, in most poor countries, is the answer to solve their per capita income problems, along with other related problems.

I find it interesting that you mention "Jie Jing and Junsen Zhang (2005) use a 76-country dataset and find a statistically negative effect of life expectancy on fertility." since China has limited fertility by force. Normally, lower infant mortality rates raise life expectancy rather than lower fertility rates.

Plamen Nikolov, Harvard University

Dear Arthur,

I point you to a study that covers 76 countries and uncovers a relationship between life expectancy and fertility from all these countries; you respond with a statement specifically about China. Perhaps you appeal to some form of "existential fallacy" in logic, but the authors excluded China specifically because of this.

Regarding your second point on the effect of population growth on economic growth: the net relation between greater population and per capita income depends on whether the inducements to human capital and expansion of knowledge are stronger than diminishing returns to natural resources. There is little empirical evidence that higher population in more developed countries reduces per capita incomes. Becker, Glaeser and Murphy (1999) in their "Population and Economic Growth" paper argue this much more convincingly and eloquently both theoretically and empirically. My sense is that your argument will be stronger if it does not reflect the "appeal to misleading authority" fallacy from blog entries. If authority A believes that P is true in a four-sentence paragraph, please question if "P is True". I am stating the obvious here, but sometimes people add entries to a blog for the entertainment value. The serious work is published in journals and presented in seminars, not via blog entries.

This exchange has been a wonderful procrastinogen, but it is hard to continue it in this format. Happy holidays and best of wishes for the New Year!

Arthur Eckart

Plamen, I didn't read those papers. Obviously, there have been many advances, or revelations, in economics. However, there remains a lot more to learn. Also, a better understanding of what's already known is important. Happy holidays to you and good luck.


PN of Hahvahd: "The serious work is published in journals and presented in seminars, not via blog entries."


Take your academic glasses off and descend from your Ivory Tower (without tripping down the stairs). The "truth" is nobody's preserve and especially not that of the halls of prestigious Higher Education.

Academic work deserved to be placed in the crucible of forum discussion, if not simply to verify that it hold water -- which is not the case all too amazingly often.


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