Growth, Wealth and Health

发布日期:2019-03-22 12:35    来源:

On March 10th, 2019, Professor LIU Guoen, Director of China Center for Health Economic Research and Chairman of the Academic Committee of National School of Development at Peking University, delivered a talk on Growth, Wealth, and Health, at the Institute of South-South Cooperation and Development. The event was hosted by Professor FU Jun, Academic Dean of the Institute.

Professor Liu introduced the topic by asking the audience the most famous phrase in economics.  After rumbling with diversified terms by the students, he led the phrase Economic Growth: according to his research, the phrase Economic Growth has over 950 million google searches in Economics ranked the top as of February 23, 2019.

He quoted Robert Fogel’s Catching up with the Economy (AER, 1999), “The advances in the technology of food production after the Second Agricultural Revolution (which began about 1,700 A.D.) were far more dramatic than those associated with the First Agricultural Revolution, since they permitted population to increase at so high a rate that the line of population appears to explode, rising almost vertically.” However since the industrial revolution, the world's per capita income had shown a significant difference.

What are the source of Economic Growth? Professor Liu gave a parable story of two twin countries that were separated by ideological concepts. Eastrich had developed rapidly in the past 35 years while Westpoor was poor during same time. The two countries shared similar territory and population, yet their economic growth was different with eight times factor.

In his analysis, the two countries showed differences in the capital invested, the technology used, and the knowledge and efficiency level of the two workforces. Westpoor’s labour force was not motivated because of institution arrangements, while that of Eastrich inspired resulting in the efficiency of the workers. The indicative conclusion for Total Factor Production is that technology and efficiency are key to economic growth.

Professor Liu used the Solow model to explain economic growth by capital accumulation, labor growth, and technological progress. It assumes that income per worker is determined by capital per worker and productivity. Capital grows over time and its accumulation depends on investments and depreciation. Therefore, capital accumulation equals savings minus depreciation. Here the saving rate is the key. If income level does not affect the saving rate, the positive relationship between the saving rate and income per capita would support the Solow model. If the saving rate is determined by income as well, one can challenge the Solow model with savings for investment as a causal driver for growth.

It is notable that if we log-linearize the production function, the resulting equation would show that population is positively correlated to total output. Is population the engine of economic growth? A western saying goes, “With every mouth, God send a pair of hands.” If comparing GDP per capita with population growth rate worldwide, one can directly draw the conclusion that the richer the country is, the lower its population growth rate is. A more profound question is, however, if population growth rate endogenous. In fact, many economists believe population growth contributes to technological and productivity progress. Jones and Vollrath (2013) argued that the Solow model failed to consider the presence of non-rivalrous goods, especially the new ideas which increase along with the absolute population and play an important role in economic development. Economist Friedrich Hayek maintained that labor may yield increasing rather than decreasing returns with, not simply more men, but more different men. Growing differentiation of individuals provides basis for a more successful use of the earth’s resources and thus brings an increase in productivity.

Touching on health and economics, the passionate professor explained that health is the capital for economic growth. He quoted the WHO Commissioned Report led by Sachs J (2000):Improving the health and longevity of the poor is an end in itself, a fundamental goal of economic development. But it is also a means to achieve other development goals relating to poverty reduction. The linkages of health to poverty reduction and to long-term economic growth are powerful, much stronger than are generally understood. The burden of disease in some low-income regions, especially sub-Saharan Africa, stands as a stark barrier to economic growth and therefore must be addressed frontally and centrally in any comprehensive development strategy."

Professor Liu then pointed out that health debacle is one of the root causes of poverty in developing countries. What is worse, there is a so-called Health-Poverty Trap, in which low income tends to cause poor health, which in turn, tends to cause low income. This is a challenge China is still facing. Sampling research is done by a respected scholar, Professor Scott Rozelle. In a previous lecture at ISSCAD, he gave empirical evidence to show that among the pupils who were sent to free elementary schools in China by forty thousand households, most of them dropped due to sickness. The sample revealed that 27% of students dropped out of school due to anaemia, 33% due to parasites while 25% dropped due to myopia.

Showering the students with more tips, Professor Liu indicated that health affects education behaviors, fertility behaviors (with China having a low fertility rate at an average of less than 1.3%), saving behaviors (sick people do not save as they spend money on medical treatment) and as well as social behaviors. When a society is sick, it leads to increased unemployment, decreased returns for job training, increased health income premium and reduced medical tourism. He fervently suggests taking health as a consumption good and an investment good. Do you invest in your health today?