WIDER Annual Lecture 10 Global Patterns of Income and Health

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WIDER Annual Lecture 10 Global Patterns of Income and Health UNU World Institute for Development Economics Research (UNU-WIDER) WIDER Annual Lecture 10 Global Patterns of Income and Health: Facts, Interpretations, and Policies Angus Deaton UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Norway (Royal Ministry of Foreign Affairs), Sweden (Swedish International Development Cooperation Agency—Sida), and the United Kingdom (Department for International Development). UNU World Institute for Development Economics Research (UNU-WIDER) A research and training centre of the United Nations University The Board of UNU-WIDER Ernest Aryeetey Francois Bourguignon Ronald Findlay Roberto Frenkel Martti Hetemäki Deepak Nayyar, Chairperson Vladimir Popov Ex Officio Hans van Ginkel, Rector of UNU Anthony Shorrocks, Director of UNU-WIDER UNU World Institute for Development Economics Research (UNU-WIDER) was established by the United Nations University as its first research and training centre and started work in Helsinki, Finland in 1985. The purpose of the Institute is to undertake applied research and policy analysis on structural changes affecting the developing and transitional economies, to provide a forum for the advocacy of policies leading to robust, equitable and environmentally sustainable growth, and to promote capacity strengthening and training in the field of economic and social policy making. Its work is carried out by staff researchers and visiting scholars in Helsinki and through networks of collaborating scholars and institutions around the world. www.wider.unu.edu [email protected] UNU World Institute for Development Economics Research (UNU-WIDER) Katajanokanlaituri 6 B 00160 Helsinki, Finland Copyright © UNU-WIDER 2007 Camera-ready typescript prepared by Lorraine Telfer-Taivainen at UNU-WIDER Printed at Hakapaino Oy, Helsinki, Finland: www.hakapaino.fi The views expressed in this publication are those of the authors. Publication does not imply endorsement by the Institute or the United Nations University of any of the views expressed. ISSN 1455-3082 ISBN 92-9190-966-1 ISBN 13 978-92-9190-966-7 (printed version) ISBN 92-9190-967-X ISBN 13 978-92-9190-967-4 (internet version) CONTENTS List of tables and figures iv Foreword v Author’s acknowledgements vii About the author viii 1 Introduction: inequalities in income and inequalities in health 1 2 Income and health: some facts 2 3 Income and health: poverty and inequality 4 4 Changes over time: patterns of convergence and divergence 5 5 The welfare consequences of international mortality patterns 7 6 Convergence, or not, and why should we care? 9 7 Is growth good for health? 11 8 Growth and health: another look at the evidence 14 9 India and China 19 10 Conclusions 21 References 23 iii LIST OF TABLES AND FIGURES Table 1 Convergence and divergence: standard deviations of measures of health and income, 1960-2004 6 Table 2 Death and poverty around the world 12 Figure 1 The Preston curve in 2000 2 Figure 2 Life expectancy and infant mortality 10 Figure 3 Proportional changes in infant mortality and per capita economic growth 15 Figure 4 Proportional and absolute changes in infant mortality and per capita economic growth 15 Figure 5 Proportional and absolute changes in infant mortality and per capita economic growth, 1960-2000 16 Figure 6 Infant mortality rates and economic growth 17 Figure 7 Economic growth and life expectancy 17 Figure 8 Income and child mortality in India and China 20 Figure 9 Income and infant mortality, India and China (UN data) 20 iv FOREWORD The WIDER Annual Lecture is a major event in the UNU-WIDER calendar. It provides an opportunity for a distinguished speaker to present their views and ideas on a topic related to our work on global development. The 2006 Annual Lecture was given at the Marina Congress Centre in Helsinki on 29 September by Angus Deaton, Dwight D. Eisenhower Professor of Economics and International Affairs at Princeton University. Deaton’s reputation was founded on his early contributions to consumer theory and applied econometrics. More recently he has focussed increasingly on development issues, particularly topics concerned with poverty and health. His lecture was entitled ‘Global patterns of income and health: facts, interpretations, and policies’, and illustrates well the need for careful dissection of the evidence discussed in connection with core development questions. It is now widely agreed that comparisons of living standards across countries, or across households within countries, should ideally go beyond measures of income or expenditure and encompass non-income dimensions of wellbeing, in particular health. Since income and health are positively correlated, adding the health dimension tends to exacerbate the inequality related to income differences alone. But this association also admits the possibility that health advances in the developing world can be a powerful force for equalization of global living standards. This is exactly the interpretation placed on international trends in life expectancy, which saw a significant narrowing of differences in longevity from 1950 to 1990. By the same token, the reversal of the trend post-1990, linked to the impact of HIV-AIDS and increasing mortality in the former Soviet Union, is generally seen as a disequalizing influence, reinforcing the impact of widening income differentials in recent years. Deaton warns against drawing such hasty conclusions, using the lecture to explain why the situation is complex and demands detailed investigation. For example, the post-Second World War improvement in life expectancy in poor countries is almost entirely attributable to a fall in infant mortality. In contrast, rising longevity in rich countries has resulted from reductions in mortality rates towards the end of life. Life expectancy provides a method of weighting these two effects, but it is by no means clear that it yields the correct trade-off for welfare evaluation purposes. Deaton documents the many ways in which assessments of health progress can depend on apparently arbitrary decisions. For instance, child mortality rates can converge or diverge over time depending on whether the data refer to levels or proportional changes. Switching from figures for mortality rates to survival rates would lead to a similar range of outcomes. More disturbing perhaps is the fact that core health variables are poorly measured in many countries, relying on crude models to fill gaps in the raw data. A great deal of fruitless effort is likely to be v expended until these data defects are rectified and until there exists a solid conceptual foundation for the impact of health on living standards. At an aggregate level, the link between health and economic growth has major policy implications, not least concerning the extent to which health deficiencies and health inequalities need to be given early priority in development strategies. Deaton draws attention to the evidence that often runs counter to conventional wisdom. He also stresses again the urgent need to improve our understanding of the factors that generate the observed differences in international experiences. Given the emphasis that Finland places on both health and equitable development, it seems particularly appropriate that the 2006 Annual Lecture was delivered to an appreciative audience in Helsinki. Anthony Shorrocks Director, UNU-WIDER vi AUTHOR’S ACKNOWLEDGEMENTS I am grateful to John Broome, Anne Case, James Foster, Anthony Shorrocks, Gopal Sreenivasan, and Daniel Wikler for helpful discussions and comments during the preparation of this paper. I also acknowledge financial support from the Fogarty International Center and the National Institute on Aging through Grant No. R01 AG20275-01 to Princeton and Grant No. P01 AG05842-14 through the National Bureau of Economic Research. vii ABOUT THE AUTHOR Angus Deaton is Dwight D. Eisenhower Professor of Economics and International Affairs at Princeton University’s Woodrow Wilson School and Department of Economics. He is a British citizen, who has previously held appointments at the Universities of Bristol and Cambridge in England. He is author of several books, including Economics and Consumer Behavior (with John Muellbauer), Understanding Consumption, and The Analysis of Household Surveys, as well as of many journal articles. His research interests include health, economic development, poverty, and inequality. A major recent focus is on understanding the many links between health and wealth. He works on both rich and poor countries, particularly South Africa and India. He has been a long-time consultant to the World Bank, and has served on US National Academy of Science panels on poverty and family assistance, on price and cost-of-living index numbers, and on racial and ethnic differences in health. In 1978, he was the first recipient of the Frisch Medal of the Econometric Society, and was Editor of Econometrica from 1984–88. He is a Fellow of the British Academy, of the Econometric Society, and of the American Academy of Arts and Sciences. He is a past Vice President of the American Economic Association. viii 1 INTRODUCTION: INEQUALITIES IN INCOME AND INEQUALITIES IN HEALTH Global inequality takes many dimensions. Not only is there great inequality across the peoples of the world in material standards of living, but there are also dramatic inequalities in health. The inhabitants of poor countries not only
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