The Health and Poverty of Nations: From theory to practice

Health is both a direct component of human well-being and a form of human capital that increases an individual's capabilities. We argue that these two views are complementary and that both can be used to justify increased investment in health in developing countries. In particular, we argue that the large effect improved health has on household incomes and economic growth makes it an important tool for poverty reduction. We survey the literature on the link between improvements in health and improved economic growth at the national level and also the link between improvements in health and improved productivity and wages at the household level. The theoretical arguments and related empirical evidence demonstrate a large effect of health improvements on productivity, household incomes, and economic growth. Given the large payoffs to health that exist in developing countries, we assess how health can be improved. We also argue that the income gains that result from health interventions can potentially feed back into better health in a process of cumulative causality, suggesting a fundamentally new rationale for greater spending on health in developing countries. In addition, we contend that, for health sector policies to be successful, there needs to be deep institutional change at the international, national, and local levels that puts greater emphasis on the health sector, and in particular that focuses on the health needs the poor themselves identify as important. The HIV/ AIDS epidemic represents the major challenge for health in many developing countries today. We use this as a test case showing how successful health interventions require not just increased spending, but also a profound commitment to change by all sectors of society.