Econ 232 Post Midterm
Schooling
formal training and instruction provided in a classroom setting, which aims to education students. 1) three categories 2) major course 3) Tremendous growth 55%--> 17% 4) rates of return 5) economic growth 6) underinvested
crude birth/death rate =
number of live births/deaths per year per 1000 people
Schooling as Social Investment with Social Return
Cost: govt. spending on infrustructure, scholarships + teachers Also possible to figure out whether it is a worthwhile investment both public nad private
The causes of population growth (LA)
Malthus Why birth rates decline (incl. Becker Model)
Morbidity
Measures rates of disease or illness, an dprovides information on how people live, whether they live in full health or experience disabilities that may limit their participation in work or family life. Stunting/Underweight = % of children under five that have a height/weight to age ratio more than two standard deviations below the WHO global reference median
Education as an Investment (LA)
Nicaragua Internal Rate of Return Estimated Rate of Return
Brief History of World Population (LA)
Population growth is a recent and unprecedented event in human history. ice age (13000) → 1 A.D. PG=0; 1 A.D (230m) → 1820 (1b) = 0.08%. 1800 → 1945 = 0.6%. 1945 → 2009 = 1.6% How go from small/stable to nearly 8b? agricultural rev increased capacity to sustain life, but growth held back by famines, plagues, and wars. Industrial Rev further expanded population-carrying capacity (innovation, infrastructure/transport, DOL, food prices fell, medicine, hygiene). 1945 saw further improvements in food supply and disease control, effecting Developed and developing countries alike (DR, LE) = baby boom = 1960s-1970s population explosion World population growth has begun to slow over at least the last 4 decades, and current projections do not envision that the twenty-first century will see increases as large as those of the last century. demographic transition (+ today, + future)
Investment
flow of resources into the production of new capital
Demographic future (the world)
The world: increase at current rate (1.2%) 26billion by 2100. linear extrapolation = misleading as PG has been slowing for decades. scenarios (assumption of declining mortality is constant, different assumptions of fertility) High: TFR does not reach replacement: 15b by 2100 Medium: TFR slightly below replacement by 2050: 9b Low: TFR reaches well below replacement, max at 8b in 2050 and decline to 6b by 2100 commonality: increasing population until 2050. Why? TFR remain high bc desire for large families and failure to achieve desired number of children (unwanted children) AND population momentum. Overall, significant increases in world population almost exclusively in low and middle nations over the next 40 years
What is Health? LA
WHO: state of complete mental, physical and social well being. Such a complex structure difficult to measure this way and likely varies across cultures and over time. So most measures of health describe the absence of health: mortality and morbidity. Transitions in Global Health The Epidemiological Transition
What effects fertility? (complex combination of forces)
a) Passion between the sexes? societies consciously control human fertility meaning birth rate is never biological maximum b) tradition/custom: social norm, indicator of wealth c) Individual rationality
natural increase =
difference between crude birth rate and crude death rate
Inequality meets poverty
inequality is an important determinant of poverty but they are not the same (Bangladesh must lower inequality but USA much lower rates of poverty). Of course, GDP is a major factor differentiating these two measurement of well-being in society.
Mortality
measures deaths in a population. Represents a complete failure of health and reveals much about a populations standard of living. Life expectancy (+ health adjusted) mortality (+under five)
Health-Adjusted Life Expectancy
reduces LE by years spent with disabilities which are weighted according to their level of severity and duration. It combines mortality and morbidity information into a single unit to address limitations of isolated statistic. % of life lost to disability tends to be higher in poorer countires (Europe looses 11% while Africa looses 15%) because some limitations effect children (injury, blindness, paralysis) and because of the effects of several tropical diseases such as malaria
Why birth rates decline
two kinds of demographic change affect crude birth rate: a) Change in population of difference age groups: rise in share of people of reproductive age increases birth rate b) Fertility
Education as an Investment/Benefits
1) On average, people with more schooling earn more than people will less schooling. This holds for men and women, in stagnant or rapidly growing countries = robust. 2) CONSIDER Nicaragua: age-earnings profile. Shows that the more education, the higher the age-earning profile tends to be (robust for men, women is overlap). This suggests that education is an investment, where the flow or resources includes private and public expenditures and, the capital is human capital which makes workers more productive, and the return is earnings. 3) One way to determine whether education is a worthwhile investment is by the internal rate of return. 4) BUT schooling also represents a social investment with a social return - must consider this too 5) Estimated Rates of Return 6) Problem of Identification and Externalities
poverty and growth
1) one study compares growth in income of the bottom 20% with overall economic growth. The trend found that growth is generally goo for the poor - slope of 1.2. there were cases where average incomes of poor decline despite growth = ruthless, about 1/5 of the time - but overall emperical records suggest that economic growth benefits the poor more than it leaves them behind. 2) However, growth is not enough - this means that increase in inequality accompanying growth was so large as to reverse gains arising from GDP. inequality also pushes poor further back meaning GDP doesnt alleviate poor as much as it could (e.g. LAtine America inequality halved the number that could have risen above the $2 a day PL. 3) Futhermore, even when growth in income pf poor exceeded rich, rich still recieve a much larger actual increase in absolute income. so even when growth is good for the poor, the number bwow the poverty line falls, the absolute income gap between rich and poor continues to widen - comparative utility. 4) Growth can be pro-poor. Washinton Consensus 1. Macroeconomic Stability: low budget deficits and low inflation 2) Economic Openness: reducing trade barriers and encouraging foreign direct investment: nations export goods in which they have comparative advantage increases employment over time and can allow exchange of tech to increase productivity. trade reduces prices poor much pay for goods and services. E.g. EAST ASIA. but MEXICO (NAFTA) hurt farmers who were previously protected by tarrifs. Finally Land reforms - double edged sword
Trends and Patterns in schooling
1) todays labour force (50% Thailand NONE vs USA 50% tertiary) 2) advocated for --> evident in statistics over the last three decades 3) Past three decades over 25: Mean years of schooling has sat around 10 for HI and Europe + Central Asia, in 1980 only 2 years in SSA and ME/NA but this has doubled/tripled by 2010. 4) Since 1975, gross enrollment for PRIMARY has either been high for decades ( Central Asia, Europe, HI) or expanded rapidly (ME&NA, SSA). L/M high NET enrollement (88% 81%), in some countries 1/5 children did not complete five years = challenge of universal completion. 5) SECONDARY: enrollment gains in almost all regions (LA 1975 40% --> 2005 90%) but SSA and South Asia still lag 6) TERTIARY: absolute level and expansion remain low in all developing regions even East Asia despite growth. enrollment rate High Income: 67%, Low = 7.5% 7) However, disparities in education do not just exist between countires. Bottom quintile routinely experiences half the mean years of schooling as the top quintil - this is especially bad in Ethiopia and Mali. In India, bottom - 4yrs, top = 11yrs. OVERALL, there has been a global revolution in the provision of schooling 8) Girls vs. Boys: gender gap has declined significantly in all regions. Developing nations: 1960 3/2, 2010 7.5/6.5. some have achieved near parity (LA, Europe). BUT significant variation - South Asia 3.5/5.5
Demographic situation today
2009: natural increase 1.2%. (2.3, 1.1, 0.4)High Income (16%) China (30%) SSA (12%) with highest natural increase at 2.4%. Developed countries: ageing populatoin so crude death rates likley to rise, declining fertility so all growth due to immigration. TFR below replacement levels in Eastern Europe and Central Asia. At same time, neither Africa, LA and Middle East have progressed far along demographic transition, implying faster PG and increasing chage of worlds total PG. Today, most regions of the world are experiencing a decline in fertility and are approaching replacement levels. Sub-Saharan Africa is the one exception, where total fertility remains high, but even in this region, some decline is evident.
Malaria
4th leading cause of death in SSA. a) 91% of deaths in Africa b) also a problem in Southeast Asia, India, LA and Oceania c) particularly disproportionate effect on the poor: Zambia 13% lowest quintile 3% highest quintile. d) reduces growth by 1.3%, and programs can be cost effective (benefits of complete package of interventions in SSA 18* higher than costs) d) Market failure: disease of the poor so commercial opps. are limited for selling vaccine and recouping expensive research and development costs: the price that is low enough is too low to create incentive for private companies to invest in developing new vaccines or increasing production capacity. ALSO DDT e) Overcoming Market Failure: Vaccines are cost effective and save so many lives yet are not being developed and used for many killer diseases (all three). Cost of development and risk of failure for vaccines are high. One way to overcome: donors provide advance market commitment (AMC) to provide firms financial returns needed while keeping costs low for consumers = sponder top up - commit to amount of sales necessary to incentivise AMC provides incentive and respects IP, removing pressure of firms to sell at a loss AMS uses public funds to make markets work more effectively to solve some of the developing countries most pressing health problems 2009: first AMC launched to create vaccines against pneumococcal diseases
Tuberculosis
6th leading cause of death in SSA. a) big problem in densely populated or enclosed areas b) infects just under 1/3 of the worlds population, 90% deaths in developing nations. c) 2-4* more likely in low income/no schooling groups India d) Economic Loss: lost work (av. 3-4 months), extra nutritional needs, treatment and transport, withdraw children from school (300,000 India for parents) Combating TB: Directly Observed Treatment Short Course (DOTS) - $10 - 6-8Month course - dynamic time inconsistency as start to feel better/inconsistent drug supply - leading to emergence of drug resistant TB - which is worse than no treatment at all (e.g. Russia, expensive 2 year treatment of Chemo.
Investment in Health and Education
After accounting for other factors affecting growth: countries with longer life expectancy tend to grow faster. General health (as indicated by life expectancy) promotes growth by influencing productivity, encouraging savings and capital accumulation and encourages investment in education - as workers are healthy, productive, and expected to live to reap the benefits. For example, Malaysia in 1960 has low LE of 54, due in part to issue with disease, and subsequent moderate growth (3.4%). The government Malaria control program made inroads, life expectancy rose and growth was 5% for 2 decades. Increased quantity + quality of education leads to higher growth because a more skilled workforce improved productivity. This is because workers work faster with fewer errors, use machinery more effectively and can invent/adapt to new tech. This improves capital accumulation because it attracts new investment. Both health and education have a positive cyclical relationship. Improved education → more skilled workforce → improved productivity + capital accumulation → supports growth → more resources to finance stronger educational systems → improved education
Why does fertility not increase in income? (both over time and between socio-economic brackets)
Becker Model: Couples Maximize a joint expected utility function in which the goods they can buy are a) quantity of children b) quality of children c) conventional goods and services Constraints faced by parents are a) time b) cost of purchased goods and services as income rises, the cost of children tends to rise (opportunity cost), given this rise, many parents opt to invest in child quality instead. This model replaces Malthus assumption of passion as seeing fertility as an outcome of a rational process.
Individual Rationality Impact on Fertility
Benefits: production/income/household + social security (all of which are more important in low income countries, especially where institutional safety nets are not in place) Costs: Explicit + implicit + national (smaller inheritances of agricultural land, a natural resource constraint + pressure on social investment in education) Thus, families in traditional societies have many children because it is in their rational interest to do so
Estimated Rates of Return
Consider real rates or return for over 75 nations dating back as far as 1950 We find: a) returns on all levels of schooling and in all income categories are almost always in the double digits. b) Returns tend to be greater for developing economies (workers are scarce so enjoy higher premiums) 26% vs 12% for tertiary c) Returns are highest for primary schooling (opportunity cost is lowest here) typically around 25% d) Even though they are smaller, they are still sufficiently high as to be an attractive investment with returns larger than say physical capital e) it is found that rates of return to schooling are much higher than many other forms of investment such as government bonds, why? because human capital cannot be used as a collaterol - it is more risky
Sierra Leone vs Denmark
Death rate: 10/24 Median age of those who died: 77/4 Under-5 mortality: 4/194 Life expectancy: 79/40 Total expenditure on health: 3349/44 health-adjusted life expectancy: 70m73f/34m37f The experiences of D and SL reflect the experiences of their geographic regions. Africa has the highest under 5 mortality (142) followed by the Mediterranean then Southeast Asia, with Europe having the lowest (14)
How Growth Effects Income
Don't forget diminishing returns 1) Productivity a) energetic mentally alert workers with less sick days and higher strength and endurance (Sugarcane workers in Tanzania with Schistosomiasis cut less cane and earn less wages) b) family members loose less days to take care of family (SA, HIV, days lost attending to illness and funeral) c) Education: indirect: children needed to produce/care. direct: absenteeism + attention span (Kenya worms). Becker model. d) childhood health: effects productivity later in life (e.g. Brazil: shorter (malnourished) workers earn less wages 2) Savings and Investment a) higher LE incentives LT investments b) poor health means resources diverted to medical expenses = lower savings c) govt. fighting endemic allocate spending here, crowding out other priority expenditures and reducing capacity to invest in infrastructure or capital investment. (SA HIV reduces productivity therefor savings, reducing GDP by upto 1%) d) diseases use up productive assets such as land. (E.g. reduction of malaria allowed farmers to work new lands in Malaysia and Sri Lanka) e) Disease undermines foreign Investment.
If childbearing is an economic decision then...
Fertility would be higher when a) children contribute to household enterprises b) higher infant deaths c) lack of institutionalise social security systems d) fewer opportunities for women to work in jobs incompatible with child rearing e) income is higher emperical support for all but the last one
Geography
Geographical characteristics of a country include its location in regards to the tropics, and in regards to major economic markets. Economic growth refers to a rise in the average per capita income (inflation-adjusted) reflecting an increase in the sum of the value of all goods and services produced by an economy. There is a strong case for the argument that geographical location is significant for growth. There is a relationship between distance from the tropics and growth. There are no rich economies in the tropics of cancer or capricorn. nationsin unfavourable geographical locations experience erratic weather (reducing worker productivity) and poor soil (diminishing economic capacity) both of which hinder economic growth. Isolation from major markets also hinders growth as it means higher transport costs, so importans are more expensive (diminishing disposible income in which to save) and exports less profitable, both of which hinder growth. Ethipia is one country experiencing the woes of poor location, and correspondingly experiences low economic growth. There are expections to this rule, for example Botswana, which has achieved growth despite an unfavorable location.
Macroeconomic and Political Stability
Instability undermines investment and growth and disproportionately affects poor who are unable to protect themselves against volatility. High inflation is volatile leading to unstable relative prices, difficulty to predict future profits and costs , increasing risk for investors. (E.g. Congo: hyperinflation 1990-2002 + war = negative growth (-7.2%), lower life expectancy and higher infant mortality) Volatile short-term capital flows lead to wide swings in exchange rate, and cause financial crisis. Political instability (War Military Coups) undermines growth.E.g. ⅓ of countries in sub-saharan africa were embroiled in war → toll on live, infrastructure, institutions, economic activity + commerce. By contrast, successful developing countries have experiences decades of political stability (or instability that was short-lived) Negative Cycle of Civil war in low-income countries Poverty increases risk of conflict → conflict undermines growth → poverty increases Stability alone does not guarantee growth (Cuba + Kenya)
Institutions and Growth
Institutions include society's formal rules (laws and regulations), informal constraints (conventions + norms) and the organisations that operate within rules and constraints. Stronger governance and institutions help improve the environment for investment by reducing risk and increasing profitability. Investors are more likely to make long-term investments where they feel property rights are secure and their factory, machines, or land will not be confiscated. Strong legal systems can help settle commercial disputes in a predictable, rational manner. Low levels of corruption help reduce the costs of investment, reduce risks, and increase productivity, as managers focus their attention on production rather than influencing politicians and government officials. Strong market-stabilizing institutions can help establish effective government policies that influence both factor accumulation and productivity.
Measures of Health
Mortality - under-five mortality rate, mortality rate, life-expectancy at birth, healthy-life expectancy at birth Morbidity - stunting, underweight, Environmental risk factors - acess to water sources and improved sanitation (rural vs urban) Health System statistics - number of physicians/nurses/hospital beds for 10000, per captia expenditures on health Health Services received - immunization coverage, number of births attended to by a professional
Kuznets Curve
Much of the early literature on the impact of growth on inequality was dominated by the Kuznets hypothesis. Kuznets posits that inequality rises with an increase in national income in the early part of economic development. When the economy reaches a certain level of development, inequality then subsides. Therefore, Kuznets predicts an inverted U-shaped relation between growth and inequality. Kuznets intuitive reasoning for this is that as the economy transitions from an agricultural economy to an industrial one, the higher and less dispersed returns to factors of production which are associated with industrial production cause a temporary concentration of wealth. As more factors of production shift from agriculture to industry, it is suggested that inequality will then fall.. In this way, it is argued that there is a complementary relationship between the two processes in the long-run. While the Kuznets hypothesis certainly gained traction within economic thought, it is not supported by empirical evidence. Infact, if one thing is for certain, it is that there is no universal trends regarding the impact of growth on inequality. Chile and Taiwan, for example, have both experienced high levels of growth yet persistent levels of inequality (high and low, respectively) (Perkins et al. 2013). Where some countries have at some point exhibited the Kuznets curve, it has subsequently broken down (e.g. Thailand, USA). In relation to inequality: there is no universal trend indicated how complex the relationship between inequality and income really is. There are a host of other channels through which these factors influence eachother - e.g skill biased technial change, fertility, savings, political economy approaxh
Population Momentum
Populations that have been growing rapidly, as they have been especially in the developing world, have large numbers of people in, or about to enter, the most fertile age brackets. Even if all the world's couples today were to start having just enough children to replace themselves, the total population would continue to grow for many more decades before eventually leveling off. This is because today's children, who outnumber their parents, will become tomorrow's parents. Stated differently, past fertility decisions echo far into the future (Box 7-2). Population momentum alone could add several billion more people to the world's population in the 21st century
Measuring Poverty
Poverty is a multidimensional concept that encompasses deprivations not readily captures by statistic allows. Total Headcount Head Count Index Poverty Gap = (PL/MC)/PL * H Poverty Gap squared
Problem of Externalities
Schooling accrues benefits to members of society above and beyond private benefits to individuals undertaking the education. This is not accounted for when estimating the return on investment (so its likely higher than the estimates). Means that estimated Social returns are lower than private ones at every level. No direct means are availiable for estimating the positive externalities of schooling; the average social rates of retun account only for social costs, using private not social benefits. The benefits include... a) crime b) political participatoin c) health spillovers (children + mothers, use medical knowledge) d) network externality (communication) e) Technological progress and the scale effect
Growth Accounting and TFP.
Solow pioneered early efforts to quantify the contribution of each of the proximate causes of increased output—capital accumulation, labor accumulation, and productivity gains—to economic growth. The study of these relationshpis is called growth accounting, or sources of growth analysis. The goal of sources of growth analysis is to decompose a change in output into the portion explained by the changing use of each input and the unexplained portion that we designate as productivity growth. One way to explore how factor accumulation and productivity growth affect output and economic growth is by examining a production function, which characterizes how inputs (capital and labor) are combined to produce various levels of output. Combining capital and labor into the single "capital per worker" term is a convenient way to simplify the analysis, but it also reflects the dominant role that capital has played in thinking on economic growth over the years. Draw and Explain the Model. Draw the equation - note 'a' is the rate of change of TFP. TFP is meant to measure the contribution to production of efficiency, technology, and other influences on productivity. What is labeled TFP actually, in practice, is a combination of errors in the data, omission of other factors that should be included in the growth equation. Rather than 'a' truly being TFP growth, 'a' simply is the part of measured growth that cannot be explained by data on the traditional factors of production - the "measure of our ignorance" about the growth process This type of accounting analysis has been used widely in many countries to examine the sources of growth, with particular attention paid to calculating TFP growth. However, there are several problems 1) First, a represents a combination of influences that this analysis cannot entirely disentangle. 2) in addition to TFP, a captures the net effect of all the errors and omissions in the other data
Sources of Growth over time
Solow's initial study on the United States attributed a surprisingly large share of growth to the residual and a correspondingly small share to changes in the capital stock: 88 percent to TFP growth and only 12 percent to increases in capital per worker. If we consider the sources of growth from 1960-2000 we find that: that capital accumulation tends to contribute substantially to growth in low-income countries, while increases in the size and quality of the labor force and productivity growth also make important contributions (e.g. ME 1980 only 0.07 growth in TFP and 1.15 growth in output p/w) . Productivity growth tends to account for a larger share of growth in high-income countries (e.g. 1980s 1.8 growth 0.7 growth in K 0.90 growth in TFP). d) TFP growth tends to become more important as income rises and was more important for the rapidly growing economies of india and china that other areas of asia. e) it was negative in SSA 19708090... war, unrest, corruption, accumulation of unproductive assets
Discuss the demographic future for the most populous countries
Specific countries: (medium scenario) India, China, US = most populous China 7% increase due only to population momentum as TFR well below replacement levels US 36% increase due to immigration India 47% due to populaiton momentum + TFR above replacement levels Highest growth in SSA (e.g. Congo 144%) followed by South Asia (e.g. Pakistan 81%) Japan + Russia pumped off top 10. Overall, significant increases in world population almost exclusively in low and middle nations over the next 40 years
Health, Income and Growth (LA)
Strong positive relo between health and economic growth. Higher LE --> faster growth. Mortality rates are highest in poorest countries, and this drops off sharply in conjunction with higher incomes. (GRAPH). GDP below $2000: 129/1000. GDP $4000-6000: 44/1000/ GDP $10000+ 12/1000. Consider both channels: how income effects health and how health effects income
the Lorenz Curve
The Lorenz curve is a graphical representation of income inequality or wealth inequality. It plots percentiles of the population on the horizontal axis according to income or wealth. It plots cumulative income or wealth on the vertical axis, so that an x-value of 45 and a y-value of 14 would mean that the bottom 45% of the population controls 14% of the total income or wealth. The straight diagonal line with a slope of 1 represents perfect equality; the Lorenz curve lies beneath it, showing the actual distribution. The farther away the curve is from the baseline, represented by the straight diagonal line, the higher the level of inequality. The area between the straight line and the curved line, expressed as a ratio of the area under the straight line, is the Gini coefficient, a measurement of inequality in a single figure. Complete equality, in which every individual has the exact same income or wealth, corresponds to a coefficient of 0. Plotted as a Lorenz curve, complete equality would be a straight diagonal line with a slope of 1 (the area between this curve and itself is 0, so the Gini coefficient is 0). A coefficient of 1 means that one person earns all of the income or holds all of the wealth. CRITICISM: when comparing two, the curves might intersect, making it difficult to say which is more unequal In relation to inequality: Other measures of inequality, income vs consumption vs wealth, frequency distribution, quintiles
Demographic Transition
The driving force behind the population increases of the last 100 years is the demographic transition. It is defined as the process of change in a society's population from a condition of high crude birth and death rates and low rate of natural increase to a condition of low crude birth and death rates, low rate of natural increase, and a higher total population. crude death/birth rates, natural increase, population growth rate (single/world). Consider Finland transition, typical of a high-income economy. Stage one: pre-18C. high birth rates and death rates, natural increase close to zero, by 1785 climbed to 0.6% but both rates still high Stage two: early 1800s. death rate declining more quickly than birth rate (food supply), 1830 natural increase = 1.5%, death rates continued to fall but at a declining rate, as birth rates started to drop Stage three: late 1800s. birth rates falling more quickly that death rates. natural increase = 1.2% Stage four: 2008. PG close to zero, low birth and death rates, natural increase = 0.2% (can go negative e.g. Germany). What about Developing Countries? maj. differences between historical experience of today's industrialized nations and contemporary demographic transition of developing countries. 1950-1970: death rates dropping faster than birth rates, causing natural increase to rise and peak at 2.5% during the 1960s (Jordan, 3.2%). subsequently crude death/birth rates start to drop, natural increase slow to 1.4%. Why? higher birth rates: early age of marriage,rationality, tradition. Lower death rates: began at lower GDP and fell much faster than historically due to transfer or knowledge, tech, and innovation
Total Fertility Rate
a synthetic measure of the number of children then average women would have in her lifetime if age-specific fertility rates remained constant. It is a reliable indicator of the number of children women are currently having, and its trends reveal a great deal about the world demographic transition. 1967; LA Asia = just over 5.5, SSA = 6.8 ME and North Africa = 7.0 children. high income, Europe, Central Asia = fewer than 3. Over the next four decades, at varying speeds, fertility fell in every region - by more than half is South Asia and, ME&NA and LA. Today, all regions are below 3 but Sub-Saharan Africa is the one exception, where total fertility remains high, but even in this region, some decline is evident (5.1 in 2007). LEARN GRAPHS.
Transition in Global Health
a) Last 2 Cs have seen remarkable improvements in global health. Pre1800 LE = 30. Late 1800 it increase, made dramatic gains in 1900s. 1960-2008: 50→ 69. b) Especially large improvements in LE made in low/middle income nations 1960-2008: 44→ 67 (vs high income countires 69→ 80) c) all regions have experiences this trend regarless of economic growth. East Asia (rapid growth) 39→ 72 = 15% high income GDP yet 90% LE. Latin America has second higest LE at 73 (2008) despite decades of slow growth. d) some nations have expereiences contractions in LE. SSA 1990-2005 decrease due to HIV/AIDS. Russia: 1990-1994: 64-58 (male) due to high cardiovasular disease and injury as a reslt of: a) alcohol and smoking b) nutrition c) depression d) deteriorating health system. LE now at 1990 levels. d) gaps in health outcomes between rich and moore have decreased from 25 (1960) to 13 (2008) e) thus we have a lack of income convergence but convergence of LE accross nations
The Determinants of Improved Health (LA)
a) major advances in agriculture and food distribution diminished famines and starvation (exception: SSA famines + malnutrition) b) rising income: food, nutrition, housing, health care c) Govt Policy: public health measures such as clean water, sanitation, food regulation. Institutions providing sanitation and controlling disease vectors (e.g. mosquito) = environmental risk factors d) education: better education people acquire and use new information more quickly, so its become important since the advent of medical knowledge (was not important in US in 1890s) e) Diffusion of medical knowledge: discoveries in medicine + technology, antibacterial drugs and vaccines (1930s). Advantage of backwardness: poor countries can learn from scientific knoweldge generated in developed nations and use it to promote health d) decisions of households: households make decisions that run counter to health and this cannot be explained by income. E.g. Oral Rehydration Therapy (effective treatement for diarrheal diseases) is inexpensive but often believed not to work (e.g. Western India). Futhermore, even when insecticide treated bed nets are free, take up rate is still too low. = trapped by lack of information and procrastination which is exacerbated for poor who have to take active steps to ensure health of environmental risk factors Ultimately, many important determinants of improved health that exist independent of income. Evidence: 1990 USA LE = 47 GDP = $5,500. 2009 SSA LE = 67 GDP = $5,000
How Income effects Growth
a) private consumption of G&S that directly or indirectly improve health (food, nutrition, water, sanitation, shelter, medical care) b) government spending on public health services, (e.g. immunization campaigns), ability to retain drs, infrustructure. Evidence: 7% of GDP goes a much longer way in LA ($740 pp) than SSA ($150pp). **Estimated that each 10% increase in income is associated with 2-4% decline in child mortality = income elasticity of under five mortality is -0.2 - -0.4** c) This relationship is knows as the Preston Curve (GRAPH) but correlation does not imply causation - one argument is that improvements in health and income are both consequences of new ideas and tech, rather than one influencing eathother. this means gains in LE are a result of an upward shift in the preston curve rather than a movement along it. d) but ofcourse, there are other key determinnants of heatlh that are somewhat independent of GDP (diffusion of medical knowledge and the advantages of backwardness, + decisions of households) low income explain much, but not all, disparity in health outcomes across regions and over time
Programme for International Student Assessment
attempt to apply test of basic reading and math competancies. 15/yo representative samples selected from participating countires. 1) High always better than low - alarmingly so (OECD 19% vs Indonesia 65%). scores are income elastic. 2) WHY? a) spend more b) health c) parents (D) quantity over quality) 3) EXCEPTIONS Korea and poland 4) CRITICISMS: a. overestimates abilities where no universal enrollment. b. cultural bias (but other measures indicate similar things)
Life expectancy
derived from data on mortality. does not represent the age that most people die: its an average with a variance that assumes todays age-specific death rate remains the same (but this in unlikely due to rising incomes and medicine, or unexpected events and diseases. in Sierra Leone: LE for those who survive 5 (60) is much higher than those at birth (49)
HIV/AIDS
leading cause of death in SSA. a) 33 million living with b) 2/3 worlds infection in SSA (Sengal 1% Swaziland 20%) c) SSA epidemic stable or declining - largest in Ethiopia, SA, Zambia, Zimbabwe who together have reduced infections by 25%. Reduced because of mortality and behavior changes. caused significant regress in LE, dropped from 21 in 1992 to 47 in 2007. some countries have since returned e.g. SA, Botswana d) Poses threat outside SSA - Bahamas 3.1% prevalence, India 3rd highest prevalence and growing, also growing in Eastern Europe and Central Asia due to injected drugs e) women 8* more likely, social dis-empowerment and access to education f) children vulnerable - pregnancy birth breastfeeding g) HIV particularly disadvantaging to the economy in that it effects youth - families become further impoverished - Thailand medical care + funeral costs exceed household incomes. h) Combating HIV: with successful antiretroviral therapy, requiring medication for life, body can remain health and resume normal life. has managed HIV in richer countries but only 1/3 of the people who need it have acess in SSA (Exception: Guyana 80%). Challenge: encourage manufacturing of generic drugs while providing incentice to develop new medicines as patients develop resistence. While funds have significantly increase (1996 300m --> 2009 15.9b) this is still not enough, and has significant opportunity cost in diverting funds away from other key challenges.
Malthus
passion between the sexes cause population to expand to biological maximum as long as food supplies permit. Wage increase, workers marry young, have more children, more of whom survive, rise in population, increase labor supply, through diminishing returns food price rise, real wages fall back to subsistence levels. food supplies (which grows according to arithmetic) could not stay ahead of population growth (which grows according to geometric progression). PG is limited by factors working through death rate called positive checks: famine, plague, epidemics also limited by factors effected birth rate such as late age of marriage. Malthus was wrong because he did not believe wages would rise, but they have because capital accumulation and technical change offset any tendency for marginal product of labor to decline. death rates fell through higher incomes (expand) and birth rates fell - why? Malthus expected birth rates to increase with income: healthier better bed moms (biological capacity) + good times = early marriage and money to support kids.
population growth = population growth rate (whole word vs single country) =
relationship between annual births and deaths; natural increase in population for the whole world; difference between rate of natural increase and net migration
epdiemiological transition
the shift in the pattern of disease and causes of death that occurs as societies age and health improves, as is reasonable predictable across nations and over time. Stage one: age of pestilence and famine - most of human history, chronic malnutrition, severe maternal and child health problems, environmental problems of water sanitation and housing. Stage two: age of receding pandemics. Death rates fell as infectious disease and famine declined. People began to live longer, and started to experience heart disease and cancer in greater numbers. High levels of communicable disease (infectious. many countries stuck in this state. Stage three: Age of degenerative and human-made disease - infectious disease is replaced with chronic degenerative diseases (heart disease, diabetes) + lifestyle diseases (result of smoke + alch) + environmental diseases (pollution) overall lower mortality Final stage? emerging (Ebola, Swine Flu) and re-emerging infectious disease (increasing resistance to drug therapy e.g. TB) TODAY: many of the poorest nations are stuck in the first and second stages, while high income countries exist in the third. There are thus disparities in the causes of death worldwide. Noncommunicable disease = high income 87 SSA 25% communicable diesase = high income 7% SSA = 68% Denmark: 1/10 leading causes of death, SSA top 4
Internal Rate of Return
this is a systematic way to compare costs and benefits of schooling. Costs =... Benefits = ... (GRAPH FOR private returns to schooling). 1) One cannot simply add up costs and compare them to benefits because money received in the future is worth less than money that can be spent today, as a result of uncertainty and opportunity cost of resources. Future benefits must therefore be discounted, this is done by computing present value of all costs and benefits. 2) LEARN EQUATIONS 3) the internal rate of return is r - this is the interest rate at which the cost and benefits of schooling are equal. if r is lower than this, increase schooling. 4) even though the dollar value of benefits outweighs the dollar value of costs, future benefits are discounted more heavily than the cost incurred immediately. the higher the interest rate, the more these benefits are discounted. so PVb falls faster than PVc when r increases. 5) once IROR is estimated, it can be compared to other rates of return availiable for other investments.
gross enrollment rate net enrollment rate grade survival rate mean years of schooling
total number of children enrolled in a given category divided by the number of children of the age group that officially corresponds to that level of schooling (can exceed 100 = mixed blessing.); enrollments of only those of the relevant age group; the number or percentage of children who complete a certain grade level
Three Critical Diseases
while the burden of noncommunicable disease grows, the unfinished agenda of infectious disease remains. Three diseases in particular, which are 23* more prevalent in developing nations, are preventable, treatable or curable, yet result in significant economic loss and social disintegration.
