What happens if you combine life expectancy and GDP into a single indicator? (You spend more on health)

January 28, 2014

     By Duncan Green     

Just been skimming the overview of last December’s report of the Lancet Global health 2035 Commission, chaired by Larry Summers. The report advocates increasing health spending to close the health gap between countries, but the thing that jumped out at me was the practical application of ‘beyond GDP’ thinking in what the report calls the ‘full income approach’:

“But while GDP captures the benefits that result from improved economic productivity (the so-called instrumental value of better health), it fails to capture the intrinsic value of better health—the value of health in and of itself. Global Health 2035 reports a more comprehensive understanding of the returns to investing in health by estimating this intrinsic value using a “full income” approach. This approach combines growth in national income (GDP) with the value people place on increased life expectancy—that is, the value of their additional life years [VLYs]. Global Health 2035 estimates that 24% of the growth in full income in low- and middle-income countries between 2000 and 2011 resulted from health improvements. Figure 3 summarizes estimates of the contribution of health to growth in full income in 1990–2000 and in 2000–2011 for different regions of the world.

lancet commission chartUsing the full income approach to estimate the economic benefits of convergence in low-income and lower-middle-income countries from 2015-2035, the benefits exceed costs by a factor of 9-20, making the case for action even stronger.

The full income approach provides finance ministries, donors and other decision-makers with a strong rationale for investing in health to put their countries on a path to rapid improvement in national welfare.”

 

January 28, 2014
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Duncan Green
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