EC319 Development Economics

Lecture 3:
Health and skills attainment

Dr. Samantha Rawlings

s.b.rawlings@reading.ac.uk
Edith Morley 190

Copyright University of Reading

Lecture 3 will discuss:

1. What is health and (briefly) how is it determined?

2. Global health inequalities: health outcomes in low-income
countries
3. Large scale health issues in low income countries and their
consequences for development.
a. Malaria (in class).
b. Malnutrition (screencast).
What is “health” and how is it
determined?
 Discuss:

What do we
mean by
health?

How do we
measure it?
What is Health?
• Health is a component of human capital.
• Sometimes referred to as health human capital to distinguish it
from education human capital.
• The World Health Organization’s definition of health illustrates the
conceptual nature of health, and the implied difficulty involved in
measuring it:

Health is a state of complete physical and mental well-being

and not merely the absence of disease or infirmity.
Health is an asset

• Health is an asset.
• Health produced by households.
• Medical care is an input.

• Positively correlated with other forms of human capital.

• Healthy individuals are on average better nourished and better
educated.
To design policy we
need to understand
what determines
health.

Question:
What factors can you
think of that determine
an individual’s health?

You can give up to 5

responses in the form,
and you can submit
another set of answers
should you wish.
 Health is a multidimensional state of physical and
psychological well-being (or ill-being)

• Determination of health is complex, involving many factors and choices.

• People face health risks, determined by health stock and health
environment.

Health stock: Health environment :

External factors
Level of health e.g. climate, pollution, disease etc.
Health risks combine with choices regarding
health input use and health behaviors, to
determine the probability of health shocks
Health
stock

Health Health shocks:

input use
Health
risks • periods of illness/injury.
Environment

Health
• include diseases, nutritional
behaviours deficiencies, injuries.

• are significant source of

vulnerability in developing
countries
Health shocks
Policy and health

• The “bads” associated with health shocks include financial trauma

as well as ill health.
• Policymakers might try to intervene at different stages of the
formation of health:
• Health environment
• Health input use and health behaviors
• Health care
• Health care financing
Global health inequalities
 Life Expectancy
What does this graph show us?

Source: Our World in Data https://ourworldindata.org/grapher/life-expectancy?time=2021

 Life Expectancy
• Over time, life expectancy
has converged across
countries.
• However, there are still
huge differences between
countries:
1. In some sub-Saharan
African countries have a
life expectancy of less
than 50 years, compared
to 85 years in countries
such as Japan.
2. There are also clear
income gradients in
Source: Our World in Data https://ourworldindata.org/grapher/life-expectancy?time=2021
health.
 Burden of disease

• Disability Adjusted Life

Years (DALYs)
• Sum of:
1. Years lost due to
premature mortality
2. Years of healthy life
lost to disease and
disability

Source: Our World in Data https://ourworldindata.org/grapher/dalys-rate-from-all-causes

 Maternal Mortality

• Despite recent
widespread improvements
in the developing world,
there are huge challenges
ahead:

• In sub-Saharan Africa
more than 500 mothers
die per 100,000 live births.
This is more than 60 times
higher than the figure for
countries in the European
Source: Our World in Data https://ourworldindata.org/grapher/maternal-mortality Union.
The consequences of poor
health for development
Quick question:

Beyond the intrinsic

value of good health to
an individual, why do we
care about poor health?

i.e. what do you think are

the macroeconomic
implications of good
health?
Health affects employment, productivity and wages

• How to measure health?

• Typically: adult height or birthweight.

Height Birthweight
Cumulative impact of inputs from Measure of initial health status
birth to adulthood.

• Birth weight data rare in developing countries so tend to focus on height.

 Evidence on link between health and productivity

Currie and Vogl (2011) summarise evidence

• Recent studies have shown that height is associated with adult cognitive test
scores in China, Mexico, and in urban areas in Barbados, Mexico, Cuba,
Uruguay, Chile, and Brazil.
• Height is associated with wage gains in many developing economies:
1. In the rural Philippines, an extra centimetre of height is associated with 2%
higher wages;
2. In Mexico, this semi-elasticity is 2.5.

Currie, J., & Vogl, T. (2013). Early-life health and adult circumstance in developing countries. Annu. Rev. Econ., 5(1), 1-36.
A number of theories explain the link between height and
well-being/success.

1. Height premium to the greater strength and health of taller

individuals, which increase their productivity.

2. Physical growth and cognitive development share inputs in

early life. These common inputs induce a correlation between
height and cognitive ability.
What determines height?

Height is marker of health and nutrition during the critical

periods of growth in early life (especially from conception to
age 3).

• Height reflects the cumulative impact of

1. nutrition
and
2. health shocks in early life.
 Theoretical framework:
health and skill formation in childhood

• The process of human capital accumulation begins at conception.

• Before birth children are endowed with “stocks” of health and skills (e.g.
cognitive ability).
• These endowments capture the variation in initial states observed in the
population and have some genetic component.
• Stocks of health and skills in this model:
1. They depreciate over time;
2. They can be augmented through investment;
3. They are affected by health shocks.
 Theoretical framework:
health and skill formation in childhood

We can model the evolution of health and skill formation from childhood to
adult outcomes
Key points:
• Outcomes (e.g. cognitive skills) result from a production function.
• The production function is dynamic: investments in one period affect outcomes
in subsequent periods.
• Some stages of the technology may be more productive in producing some
skills than other stages.
• Sensitive periods: stages that are more effective in producing certain skills
• Critical period: if one stage alone is effective in producing a skill (or ability).
Health and skill formation: the model

• Consider multiple periods of childhood followed by periods of adult

working life
• The stock of human capital of a child in period t is represented by a
vector .
• We assume that at each period the human capital of the child can be
decomposed into three broad categories:
1. Cognitive abilities
2. Socio-emotional skills
3. Health
 Change in human capital over childhood
depends on:
1. Past stock of the child's skill,
2. Parental characteristics (e.g. parental skills which may differ)
3. Investments (time, goods, quality) into development of child

• Each of these inputs is potentially a multivalued vector with different

components (i.e. , can all affect skills in time ).
• Children have birth endowments
• Captures the family environment and other factors that have a direct
influence on birth conditions.
 Production function of human capital in
t+1:

θ 𝑡+ 1= 𝑓 (θ 𝑡 , 𝐼 𝑡 , h , θ0 , 𝜂𝑡 )

Period t stock of the Investments Parental Birth Shocks in

child's skills (Cognitive, in period t characteristics endowments period t that
social-emotional, and affect health
health) or skills
 Production function of human capital in
t+1:
• Past stock is a function of all past investment ().
• We can specify current human capital as a function of previous
investments:

θ 𝑡+ 1= 𝑓 (𝐼 1 , 𝐼 2 , … , 𝐼 𝑡 , h , θ 0 , 𝜂𝑡 )

Shocks that
Previous Birth
Parental affect the
investments
characteristics endowments stock of
(skills) health/skills
 Dynamic complementarity and self-
productivity

θ 𝑡+ 1= 𝑓 (θ 𝑡 , 𝐼 𝑡 , h , θ0 , 𝜂𝑡 )
• Dynamic complementarity arises when stocks of skills acquired by period
make investment in period () more productive.
• Self-productivity arises when higher stocks of skills in one period () create
higher stocks of skills in the next period ).

What do dynamic complementarity and self-productivity mean for the link

between childhood health and subsequent educational attainment?
 Dynamic complementarity

Dynamic complementarity arises when stocks of skil s acquired by period θ𝑡+1 make investment in period (𝐼𝑡 ) more productive.
• Skills produced at one stage raise the productivity of investment at
subsequent stages.
• Having better health in childhood means that investments in education are
likely to lead to larger gains in (cognitive) skills.
• This means health makes education investments more productive.
• It may also lead to increased parental incentives to invest in education.
 Self-productivity

Self− productivity arises when higher stocks of skil s in one period (θ𝑡 ) create higher stocks of skil s in the next period ¿¿
• Having better health in childhood will lead to higher health and
cognitive skills in subsequent period.
• Skills produced at one stage augment the skills attained at later
stages.
• This is without any additional investments in skills.
1. Dynamic Complementarity:

2. Self-productivity:

3. Dynamic complementarity and self-productivity:

a) Imply returns to late childhood investment for young adolescents
from disadvantaged backgrounds are low, while the returns to early
investment in children from disadvantaged environments are high.
b) Imply returns to late childhood investment for young adolescents
from disadvantaged backgrounds are high, while the returns to early
investment in children from disadvantaged environments are low.
c) Imply that inputs at any stage of childhood are perfect substitutes.
d) Produce multiplier effects which are the mechanisms through which
skills beget skills and abilities beget abilities.
 Implications of the model

• Investing in health at an early age may have large multiplier

effects if this directly impacts health and cognitive skills at later
ages.
• This leads to the idea of critical periods of investment – for health
this is seen as from pregnancy to age 2 (the first 1000 days of life).

We can use the model to look at implications of health problems in

low income countries and relevant policy to tackle them.
 Key health challenges facing low-income
countries

• Low income countries face a number of large scale health challenges:

1. High incidence of tropical diseases e.g. Malaria

2. Malnutrition

• We will consider development policy aims regarding these challenges…

• …and evidence of their impact on education
Malaria
Development Policy: Malaria

• Sustainable Development Goal #3.3:

End the epidemics of AIDS,

tuberculosis, malaria and
neglected tropical diseases and
combat hepatitis, water-borne
diseases and other communicable
diseases.

Malaria target:
• By 2030 end the epidemic of malaria in all countries.
• The targeted level of reduction, however, is not defined.
 Malaria incidence
around the world
• A significant problem in
developing countries.
• Causes significant levels of
morbidity (sickness) and
mortality (death).
• High incidence of malaria
among children and can
also be contracted during
pregnancy.
• Every twelfth child that
died, worldwide, in 2017,
died of Malaria.
Source: Our World in Data https://ourworldindata.org/grapher/incidence-of-malaria
 Question:

Thinking about the

model of health and
skills formation
discussed earlier:

How might contracting

malaria in early
childhood affect
subsequent human
capital attainment
(education)?
 Malaria and human capital: theory of skills
formation

Malaria might affect educational attainment through several

mechanisms:

1. Malaria in pregnant women may affect through mother illness (e.g.

anaemia) and impacts on foetal development.

2. Contracting malaria in childhood will constitute a shock to health,

which may directly lower both current and future health and cognitive
skills.
 Malaria and human capital: theory of skills
formation

3. By affecting early life health stocks etc. malaria may affect later life
health stocks and skills through the self-productivity mechanism.

4. Malaria infections in the household may affect parental

characteristics () e.g. reduced income.
 Summary:
Malaria and theory of skills formation

Malaria will affect:

: initial health stock via infection in pregnancy

: shocks that affect directly

: indirect effects on later stocks of health through

self-productivity

: parental characteristics
 Malaria: evidence (Lucas, 2010)

Research question: what is the effect of eliminating malaria on human capital

attainment?

Policy exploited: malaria eradication campaigns (DDT spraying) in Sri Lanka

(I945) and Paraguay (1967) which reduced malaria rates to effectively zero.

• Quasi-experimental research design, exploits two sources of variation:

• Regions with higher malaria rates prior to eradication benefited relatively
more from eradication than regions with low initial rates.
• People born at different times (different cohorts) were exposed differently to
the policy.
Lucas, A. M. (2010). Malaria eradication and educational attainment: evidence from Paraguay and Sri Lanka. American Economic Journal: Applied Economics, 2(2), 46-71.
 Malaria: evidence (Lucas, 2010)

• She compares education outcomes of women born before/after eradication

campaigns in regions with different pre-eradication malaria intensity.
• Combines individual level data on education with measures of sub-national
malaria incidence.
• Results:
• Regions with the highest pre-eradication malaria rates experienced the
largest gains in education as measured by years of completed schooling or
literacy.
• Reducing malaria incidence increased years of schooling and the
probability of being literate.

Lucas, A. M. (2010). Malaria eradication and educational attainment: evidence from Paraguay and Sri Lanka. American Economic Journal: Applied Economics, 2(2), 46-71.
Malaria - policy

• Evidence suggests eliminating malaria may have positive effects on

subsequent human capital accumulation.

But how to eliminate malaria?

• Historical elimination campaigns relied on DDT spraying; environmental
impacts of this mean this is no longer a potential policy.
• Most policy has focused on insect treated bed nets (ITNs).
• However: despite evidence ITNs work to reduce malaria, private use is low.
• Why? We will consider this next week!
Next Steps:
After this lecture you should :

1. Ensure you understand the

model of skills formation
2. Watch the screencast for
this week.

Next week we will:

Consider why use of ITNs and
other preventative health
inputs is lower than optimal.
Reading to enhance your understanding

• Currie, J., & Vogl, T. (2013). Early-life health and adult circumstance in developing
countries. Annual Review of Economics, 5(1), 1-36.
• Todaro, Michael P., and Stephen C. Smith. Economic development. 12th edition Pearons
2012. Chapter 8, *only* section 8.6
The model in class is based on two papers:
• Biroli, P. (2016). Health and skill formation in early childhood. University of Zurich, UBS
International Center of Economics in Society, Working Paper, (17).
• Cunha, F., & Heckman, J. (2007). The technology of skill formation. American economic
review, 97(2), 31-47.
These are both quite technical so do not feel you need to read them but if you want a
deeper understanding of the model then these are the resources to read.