1 Health

Development Economics
Econ 191

Health and Economics

I. INTRODUCTION

Health
- The absence of disease and infirmity (common definition by people)
- a state of complete physical, mental, and social well-being and not merely the absence of disease or
infirmity (WHO 1948)

Measuring Health Status

- Individual assessment by qualified health professionals in order to determine the health status of the
population but this is an expensive way to measure the health status of the entire population
- Morbidity (sickness) and Mortality (death)
- Morbidity statistics seldom are adequate
- Mortality statistics are considerably better

A. Indicators of health according to international standards

- Mortality and Burden of Disease (16)
- Health Service Coverage (16)
- Risk Factors (9)
- Health Systems Resources (2)

B. Indicators of health in the Philippines

Population
• 41,839,950 (49.7) = Female
• 42,401,391 (50.3) = Male
• 84,241,341 (January 24, 2005)
• 88,574,614 (August 1,2007)

Livebirths
• Total number of live births per year
• 1,766,440
• Undocumented live births (no birth certificate) = not included

Morbidity: Ten Leading Causes By Sex

• 2004
• Acute Lower RTI and Pneumonia = 776, 562 (888.8 Males, 868.0 Females)

Total Deaths
• Total deaths per year
• 2000
• 366,931
• NCR (Metro Manila) = 63,413

Fetal Deaths
• Total fetal deaths per year
• It encompasses any death of a fetus after 20 weeks of gestation or 500 gm
• 2000
• 10,360
• NCR (Metro Manila) = 2,333 Region 4 (Southern Tagalog) = 2,253 Region 7 (Central Visayas) = 1,056

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Maternal Mortality
• 2004
• Maternal Mortality by Main Cause
• Other Complications related to pregnancy occurring in the course of labor, delivery
and puerperium = 844 (0.5/1000)

Infant Mortality
• 2004
• Infant Mortality: Ten (10) Leading Causes
• Bacterial sepsis of newborn = 3,402 (2/1000)

Mortality
• 2004
• MORTALITY: TEN LEADING CAUSES BY SEX
• Heart Diseases: 40,361= Males 30,500 = Females (84.8/100,000)

Immunizable Disease
• 2000
• Mortality Among Immunizable Diseases (Under 1; 1-4, 5-9; 10-14 Years)
• Measles (B05)
• Under 1 = 412 (20.9)
• 1-4 = 877 (11.5)
• 5-9 = 504 (1.1)
• 10-14 = 34 (0.4)

Selected Causes of Diseases

• 2000
• Selected Causes of Death by Region
• Disorder of the Heart (60,417), Pnuemonia (32,637), All Forms of tuberculosis (27,557)

Child Mortality
• 2000
• Ten (10) Leading Causes of Child Mortality By Age-Group (1-4, 5-9, 10-14) & Sex
• 1-4 years = Pnuemonia (1,540 males, 1,341 females, 37.76)
• 5-9 years = Accidents ( 1,044 males, 618 females, 17.82)
• 10-14 years = Accidents (938 males, 440 females, 15.88)

II. TRENDS IN DEVELOPING COUNTRIES

• The developing countries in their plight on health is characterized by:

Limited resources: Governments spend less on health
Inequity: Rural health systems do not have enough staff dedicated to women and children
Inefficiency: vertical programs for specific diseases are not integrated with the general health systems
• In most developing countries that are dependent on agriculture, income and consumption of the poor are
prone to significant fluctuations
• According to the World Bank Report in 1990 and 1992, in using $275 and $370 as the poverty lines
expressed in 1985 PPP prices, they found out that the absolute number of poor people rose between
1985-1990 and most came from large families with large numbers of children as dependents
• Poverty and undernutrition problems are found especially in low income countries
• (World Development Report WB 1996)- there were twice as many female illiterates as there were males
in 1995- 45% and 24% respectively
• In developing countries, PEM or protein-energy-malnutrition is prevalent
-Marasmus
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- Kwashiorkor
• In contrast, in developed countries there is inadequate consumption of calories and protein among the
elderly and rich anorexics
• In Asia, the most prevalent health problem in children are hookworms due to poor hygiene
• Most of the developing countries still are gender- bias depriving women of the access to health and
education
• Much of the population of the developing countries experience hunger on a day-to-day basis, most of
them live in rural areas
• Another trend in developing countries is that the urban poor people are growing hungry this is due to the
rapid rising urban population compared to that of the rural
• In developing countries, low productivity is the cause of environmental degradation
• Developing countries not only are devastated by hunger and environmental degradation but also natural
and man-made disasters such as typhoons, wars that worsen the condition of the people
• There has also been an increase in maternal mortality in developing countries although shortage of data
hinders the estimation of the extent to which health is severed in developing countries
III. ISSUES

A. How is poverty related to health?

1. Undernutrition is a correlate of poverty

2. Poverty is brought about by inequalities not only in the world but within a country
3. Nutrition is used as a basis for determining poverty in a country
Countries like the US and India are using them

Poverty Measures become Insensitive to Health

1. Overall expenditure or item-by-item consumption
- income represents capacity to consume not consumption
- If income falls, does consumption for nutrients also fall? Do people sacrifice food for other stuff if
consumption falls?
- If consumption falls, does it mean that people become poorer? What about wealthy people who become
anorexic?
2. Absolute or relative
- the concept of poverty may vary from society-to-society, hence the concept of what constitutes one’s
basic needs including food, shelter and clothing may be dependent on the society’s norms
-poverty lines are absolute and hence not reflective of the individual concerns that each have in a
population
3. Temporary or chronic poverty
- In most developing countries that are dependent on agriculture, income and consumption of the poor are
prone to significant fluctuations
- It is easier to learn of the extent of poverty by looking at the effects of chronic poverty in the household
4. Households or individuals
- The issue is that the distribution of expenditures within the household is not accounted for
- Women, the elderly and children present problems of measuring households
- There are fixed costs in a household in running a household regardless of the size of the family

Poverty Measures
- The article discussed measures of poverty such as Head Count Index, Headcount Ratio, Poverty Gap Ratio
and Income gap ratio.
- Basically, the point here is that poverty lines are not enough, determining who the poor are is just the
first step; it’s addressing the poverty problem that is the major issue.
- Those below the poverty line need to be discriminated in order to allocate the resources well
- Who would you give the money to? How will the inequality among the poor be solved?
- Scarcity of assets and poverty are closely related, the poor usually found in rural, landless or near
landless areas

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Interconnections between Poverty and Undernutrition
a. Adequate levels of food and nutrient consumption
b. The effects of undernutrition especially on children
-muscle wastage, stunting, increased susceptibility to infection, cognitive skills
c. Chronic undernutrition in adults diminishes: muscular strength, immunity to disease, capacity to do work
d. Low nutrition can feed on a person’s capacity to work hence perpetuate state of poverty
Disclaimers:
a. The relationship between increases in income and increases in nutrition may not be strong
b. Poverty should not be identified with undernutrition because there are some that are temporarily poor
or anorexics on the other hand
c. It may be possible for the poor to be undernourished while at the same time direct nutrition
supplements may have a greater impact on undernutrition than an increase in income
d. nutritional requirements may vary from person to person
e. relationship of income to nutrition vary from country-to-country

Other Variables in the Poverty-Undernutrition Interconnection

a. Health may be desirable (physically and economically) if nutritional levels are low to begin with. Hence,
income increases may automatically translate to increase in nutrition.
b. Consumption may be driven by social status and not by nutritive value.

Income Affects Nutrition if Nutrition is Based on Calorie Consumption

Disclaimers:
a. If income levels fall below the minimum, individuals might resort to other means of acquiring nutrients
(relatives, gov’t)
b. The assumption is that as income increases, the individuals substitute these sources meaning that an
elasticity of 0.6 and 0.8 is indicative of high elasticity of nutrition to income
- (Table 8. 4 Elasticities of calorie demand to household budget) – calorie elasticity is estimated at sample
means, budget measured by household incomes, budget measured by household expenditure- Behrman,
Foster, and Rosenzweig 1994 Table 4
Findings:
a. Nutrition do not entirely drive household decision making
b. Poorer households react more to changes in their budgets by buying more nutrients
c. Peak and Lean season may have an effect on consumption through income increases. Elasticities are
high in the lean season especially for the landless and near landless

Poverty and the Household

a. The poor may not share poverty equally, there are minimum amounts of necessities that need to be
devoted to each person
- in extreme cases, since the average amounts shared are too small they might be insignificant
- some members tend to be minimally productive because of the scarcity
[see capacity curve Mirrlees 1976 and Stiglitz 1976]- shows how the nutritional problem serves to promote
unequal allocations
b. The concept of life boat ethic in which one person is left to starve for a more productive person is
unrealistic
c. Income earning potentials tend to foster unequal treatment. Nutrition and medical care serve a
functional role apart from being ends in themselves.
d. In discriminating receivers of the necessities in the household, women both adult and children, old and
infirm are usually non-disputable
e. In most respects, women working at home unremunerated or earning wages lower comparable to their
male counterparts, they are nonetheless discriminated
f. Most women if not receiving less nutrients than male counterparts, are not receiving well relative to
their needed requirements (menstruation, lactating mothers)
[Table 15.3] Sen 1984

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Issue 1: Nutrition requirements are ambiguous in the sense that they are not sensitive to the energy in the
tasks done by men and women. The assumption is that there are staple tasks for men and women hence
the nutritional requirements although this overlooks additional needed requirements.
Issue 2: Gender bias is translated into opportunity costs. Females may not be given adequate education
and health care because of the perceived importance and benefits for the family in the future.
Issue 3: Expenditure patterns fail to show gender effects within the household despite the existence.
Issue 4: No precise notion of requirements and yet the distinction made by the reception of nutrients are
significant

Old members:
• less of a position to provide these capabilities
• (Kochan 1996) expenditures on the elderly vary systematically with measures at their earning ability

WOMEN
Gender bias
• Women provide household tasks which men earn income
• Even both are engaged on monetary employment but wages to women are lower

Nutritional Deprivation
• nutrition intake vs. nutrition requirement
- Not enough to observe that women receive less nutrition than men
• this discrepancy could be resolved if the shortfall is measured relative to stated requirements
• What are the requirements? How are the requirements measured?
• SEN: Women have extra nutritional requirements like the pregnant women and lactating mothers
• allocation decisions that do not have direct opportunity costs:
a. implied cost of dowry
b. female children are not expected to pay off in larger incomes
c. infant mortality

• Problems about household and poverty:

a. lack direct data on intra-household allocation
b. no precise notion of requirements

• In order to answer the problem, supplementary research must be made with regards to differential,
educational attainment, direct anthropometric indicator differential nourishment or indicators of mortality
and morbidity

B. How is the environment related to health?

• “some diseases are caused by factors in the environment--

• “environmental sanitation”--- prevention of contamination of water, soil, food from disease causing
agents.
• 1st issue---lack of proper sewage systems in rural areas
Ex: contamination of water ways and farming lands
• 2nd issue--- lack of space, ventilation, sunlight due to crowded spaces in urban areas
Ex. Dumpsite issues, pollution of urban water ways, air pollution due to excessive C02 emissions
The issues involving the environment not only involve health but also the government’s allocation of
resources for infrastructure development both in the urban and rural areas.

C. How is economics related to health?

HEALTH AND DEVELOPMENT

Humans are resources (Human Capital, Labor Force)

The EFFECTS OF a DECLINING LIFE EXPECTANCY
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• less productive labor----
• not enough people to replace the old labor
• too old or too young - too old to be as productive as the present labor force or too young to be as skilled
as the present labor force
• lowers the return to investments in education----
Invest smaller amounts per person in skills?
• substitute capital for labor
(pero magkaka-underemployment)
• Private sector cutbacks on health benefits
• Graph page 352—relationship between life expectancy at birth and GNP per capita
• S.preston---parabolic graph
• 1930-1960
• *10-25% increase attributed to improvements in health
• while 75-90% attributed to other factors: literacy/education/ spread of health technologies/ values
***page 353---
• Shift from infections ,parasitic and respiratory-- cancer , heart and circulatory and diseases
Problem: parasitic conditions and malnutrition is hard to detect especially for places experience
these diseases as the norm .

Effects of Health on Development

THERE IS NO ONE WAY TO QUANTIFY THIS.
• health increases human potential
• everyone benefits from health
more strength ,stamina, concentration
Helps improve increase productivity in work and in school
Higher school attendance for children, better concentration
Improves quality of the human resource
Long term effect—improve human resource for the future

But how do you measure? ( Problems with measuring Social costs and Social Benefits)
• difference in data (between different countries---( ex. South East Asia and China)
• little or no observed change in productivity
• humans can adopt ( despite health conditions humans have the ability to adopt or at extreme cases even
ignore their disease and continue to work)
---Still health is something desirable----
• Health expenditures can increase the availability or productivity of non-human resources
-e.g. unusable land with endemic disease causing agents page 357
-“Prevention is better (and cheaper) than the cure…
-Savings can be invested somewhere else

Health as a Social Cost

• Reduces death rate , inc. population growth
• A decline in death rates may encourage a drop in fertility--- pero the change is relatively small
• Values and ethical considerations on controlling population and birth must also be considered

Some Indicators that We could Measure

Malnutrition
• Average Daily Calorie intake increased in the 1960s at all levels of gdp per capita
• 1989---ADCI exceeds the minimum daily requirements of approximately 2,300 in almost all countries w/
GDP per capita of ppp $ 2000
• *those with less than ppp$1000 (ss Africa and SE asia) fall below minimum

But how accurately can we measure MALNUTRITION??

ADCI- * people can live on less than the minimum daily requirements

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1st issue--- Asians are relatively smaller (although asian “smallness” of weight and height is not
entirely genetic but is also rooted on nutrition----- case of JAPAN and KOREA…
2nd issue---average calorie intake do not tell us how the calories ( IN THE FOOD) is distributed
*disparity between rich and poor in low income countries---poor people can eat less than 2000
calories a day while the rich can still each as much as 3500 even though they are both from a
relatively low income country
*so we should look at the malnourished people
E.g. Children
stunted---too short for their age
underweight—too light for their age
PCM---- protein calorie malnutrition---observing should also consider other nutrients not just
calories..
*lack of specific nutrients
-causes different diseases
*lack of vitamins- causes blindness, lack of iron causes anemia table—page 361
*usually mas tinitignan ang calories as measures for malnutrion kesa sa ibang nutrients

Food Consumption—people need to eat

• income determines food consumption
• income elasticity for food is low
Changes in price of food alter a household’s purchasing power
* the price of staple foods are basic indicators of welfare among the poor and the political stability
in most low income countries
Substitution effect—SHIFT OR GO HUNGRY
E.g. A. Sen--- famine---“precipitous drop in overall food supply”--- in most famines, there are
actually no drop in food supply but rather there is disparity in the accessibility and
distribution
FOOD Security--- condition where all people have access to enough food at all times to permit a
healthy lifestyle
Prices and consumption—do not necessarily determine nutrition Quantity and Quality
Cultural beliefs and tastes also affect consumption
“INCOME+ PRICES+TASTES”
*distribution of food in household (especially if scarce---) BAGO IKAW SILA MUNA? p. 364-365

HEALTH AND PRODUCTIVITY

Poverty, Credit, and Insurance

Credit : The poor are unable to obtain loans.
1. Lack of collateral
2 Reasons Why Collateral is Charged
a. The project to which the loan is being applied may be genuinely unsuccessful.
b. Collateral is a means to to prevent intentional default on the part of the
borrower.
2. Incentives to repay for the poor are limited
Insurance: Opportunities of insurance among the poor are easier to exploit.
Features of Successful Insurance
1. The incident which you are insuring must be verifiable.
2. Whatever you are insuring against is not subject to moral hazard.
- To avoid moral hazard, companies retreat from the provision of complete
insurance.
- Moral hazard problems are smaller for the poor.

Poverty, Nutrition, and Labor Markets

Energy balance
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1. Energy input : Access to food is the same as access to income.
2. Resting metabolism: The energy required to maintain body temperature, sustain heart and
respiratory action, supply the minimum energy requirements of resting tissues, and support
ionic gradient across cell membranes
3. Energy required for work: Energy needed to carry out physical labor.
4. Storage and borrowing: Well-fed people worry about energy surplus. People who suffer
undernutrition worr about energy deficit.

Nutrition and work capacity

1. If a low-income-undernutrition-low-income circle is possible in poor countries, why is it not
possible for some groups of people in rich countries?
- A low-income-undernutrition-low-income circle cannot exist in isolation
because of the overall supply of labor.
- If the labor market is tight, the returns to work are high even though a person
may have low work capacity to start with. These high returns permit the individual to have
adequate nutrition and then raise his work capacity over time.
2. Can’t people simply borrow their way out of the vicious circle?
- The credit market may simply be closed to poor individuals.
- There may be no way to make the undernourished poor better off without some
amount of redistribution from the portion of the population with greater access to income
and assets. (Pareto optimal)
3. If work capacity affects future work output, won’t employers wish to offer long-run contracts
that take advantage of this?
- It is unlikely that an employer will make a long-run contract with his employee
just to extract future gains from enhanced work capacity because there is no guarantee that
the employee will be around on the next day.
- If a person in good health can be identified by other employers, the market will
bid up the wage rate for such an employee.
4. If such long-run relationships were somehow in place for other reasons, would this have an
effect on nutritional status?
- It might, but in a relationship where nutrition is used positively by the employer
to build up work capacity on the part of her employee, there must be a separate factor, or
set of factors, that makes the relationship inflexible in the sense that the employee is costly
to replace.

HEALTH AND GOVERNMENT SPENDING/ MEDICAL BUDGET

Medical Services ----relatively low spending on medical services-----TABLE p. 367

-Costly Costs of going to hospitals
Uneven access and distribution
Concentration on urban centers
Urban bias--- elites, nationalism
-Elites are usually based in the urban centers
-Nationalism- “Kaya rin namin yan” attitude
-technology mindedness, transfer of inappropriate technology?

-trade off :high technology in urban centers versus more facilities to take care of smaller more
common diseases in rural areas
-referrals—patients in rural areas are often referred to the clinics and hospitals at the urban centers

***POOR people are left with less than favorable ALTERNATIVES

--- albularyo, herbalists etc…???? cheaper, nearer in rural areas
-low expenditures -- little or no improvement for facilities –especially in rural areas)
-doctors of poor countries ---tend to leave for abroad--- greener pastures…
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-balance between preventive and curative treatment: prevention is better( and cheaper than the cure)

IV. POLICY IMPLICATIONS

1. Distinctions should be made on the temporary and chronic poverty problems (temporary are
caused by economic shocks that are subtle)
2. In light of the known discrimination against women in the household, additional intrahousehold
data must be obtained
3. Additional indicators for Intrahousehold studies need to be in place:
- Differential educational attainment
- Direct anthropometric indicators of differential nourishment
- Differential mortality and morbidity indicators
4. Absolute notions of poverty should be supplemented by relative and subjective notions to capture
distortions
5. A national policy on iron supplementation for infants and young children should be put in place.
6. Allocation of budget to the poor through Intrahousehold data
7. Distribution between rural and urban areas
8. Utilizing health auxiliary workers, increasing the number of nurses, trained birth attendants, and
community health workers
9. Information dissemination
10. Women empowerment in government policies through improvement of living conditions, health car e
and safer water supply
11. Education of women that in turn affect the entire household through proper child care
12. To combat hunger, production must be increased through :
a. focusing on technology that raise agricultural productivity
b. directing more resources to agriculture
c. preventing environmental degradation
d. sharing resources more equitably (giving access to land women and the landless)- this reduces
poverty and improves distribution of income
e addressing global warming and reducing agricultural tariffs and subsidies in rich countries
13. Providing farmers roads, warehouses, electricity and communication to bring them closer to markets
14. Utilization of the international community to address to key issues that affect developing countries:
a. agricultural subsidies in rich countries inhibit agricultural growth thus affecting food security and
farm productivity
b. Global warming caused by greenhouse gases heavily emitted by developed countries worsen
weather conditions ushering more natural disasters
15. We already have the MDGs in place, all we have to do is to make sure that the government is doing
its part in upholding these goals :
Goal 4 : Reduce Child Mortality
Goal 5 : Improve maternal health
Goal 6 : Combat HIV/AIDS, malaria and other diseases
16. Many of the major causes of death in developing countries should have been preventable if there were
readily available bednets, antibiotics, trained attendants, basic hygiene and health education
17. Increase of public spending on health
18. Seeking official development assistance for poor countries
19. Opening for the poor access to clean water and sanitation by :
a. increasing resources (low cost technology or waste water treatment infrastructure
b. Increasing inequity (taxes should be payed in full by the rich, women and girls in the household
are being discriminated in their access to water and sanitation)
c. maintenance of water and sanitation delivery systems

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d. limiting environmental damage- rational water use

Economics 191 : Development Economics

Jie
Toffee
PJ
AJ

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