Environment Section:
A key area of how economic development affects health that Bhattacharya and Qiao sought to examine was the effects on the environment. They used an overlapping generation model: to understand the detrimental effects of economic growth on health and the environment. Their main findings were that where high pollution and bad sanitation is prevalent in a country, there is also high risk of catching diseases. This is regardless of whether the population seek to exercise and lead a healthy lifestyle, the negative effects have more of an impact on life expectancy than positive effects of exercise, healthy eating and policies to encourage such behaviour.
As well as this, the elasticity of longevity with respect of private health investment, also influenced by public expenditure, the marginal effect on private has increased with higher public health expenditure. Therefore there is an importance of investment in public health policies in order to support private health investment, in order to reduce the economy wise risk of contracting fatal diseases. This is in line with the findings made by Chakrabarty and demonstrate the importance of both private and public health expenditure in reducing environmental degradation as well as improving the health of the population.
Key examples of include air pollution in China and the environmental effects of Hurricane Katrina. These go towards understanding the mechanisms and theory behind these findings. For Hurricane Katrina in particular, It is found that no matter how much we work towards improving the natural environment, it always fights back, even if we invest in shelter against hurricanes. Therefore it would require a lot of capital to restore the country after a natural disaster, and in the example of Katrina, a major amount of infrastructure damage was caused. This forced the government to invest a lot to restore the country’s infrastructure and economy. However, despite the investment in rebuilding, the U.S. still has a large poor population.
https://academic.oup.com/biomedgerontology/article/67/11/1219/603396/Air-Pollution-Shortens-Life-Expectancy-and-Health
Wen, M. and D. Gu. “Air Pollution Shortens Life Expectancy And Health Expectancy For Older Adults: The Case Of China”. The Journals of Gerontology Series A: Biological Sciences and Medical Sciences 67.11 (2012): 1219-1229. Web.
http://edition.cnn.com/2013/08/23/us/hurricane-katrina-statistics-fast-facts/
“Hurricane Katrina Statistics Fast Facts – CNN.Com”. CNN. N.p., 2016. Web. 9 Mar. 2017.
1. Trades and markets are crucial for the economy as they generate the capital via taxes which the country will use for all the public expenditures (Joydeep & Xue, 2007). Competitive Markets enables the increase in productivity and aids the growth of the country (Anon.A, n.d). The agents will benefit from higher wages which in turn will mean a higher standard of living and access to better health benefit through increasing their private investment in health (Joydeep & Xue, 2007). High productivity will also mean a higher accumulation of capital for public expenditure via taxes, this will increase the health of that country’s residence via programs such as the NHS, and even welfare systems which support the elderly thus requiring less need to be saved by the agents and can indulge in increase of consumption leading to a further increasing productivity (Joydeep & Xue, 2007).
International trades with LDC will not only introduce capital but also introduce infrastructure, education and technology into an LDC (Riley, n.d). The country can even benefit from further economic growth as the agents of the LDC utilise their newfound knowledge to produce their own goods and services to compete with other organisations (Riley, n.d). Competition within the market will increase in the research and development of goods such as technology and medicine (Anon.A, n.d). This is a great advantage as it will not only increase expenditure by the agents due to desire for new tech, but also improve the standard health such as Fitbit and Exercise Apps to motivate the agents to exercise and be constantly reminded with notifications and alerts.
A few have said that tax should be reduced, which may not allow the economy to see great growth as it did with its original tax applied but soon the agents of the baby-boom generation will be retiring causing an increase in old-age dependency ratio (Fougère & Marcel, 1999; Joydeep & Xue, 2007). A greater level of savings will enable the rapid growth of the economy in the future with more consumption and even if the saved capital were to be passed on to the next generation of their family, they are likely to starts businesses or invest in companies to achieve a high rate of return thus enabling the further growth of the economy (Mitchell, 1999). This should be considered as the agents of generation t are likely to care about the agents of generation t+2 and their wellbeing (Joydeep & Xue, 2007).
With ceteris paribus, as taxes increase the private spending on healthcare will fall. This is due to the real wages decreasing when taxes are higher, this in turn reduces capital investment even further. Something to notice is though that there is a standard Laffer curve that can be applied to tax rate and public expenditure on tax. As taxes rises from a low point, to a higher point, there will be a higher public spending on health. While if the taxes are already relatively high and are further raised, this will lead to a reduction in expenditure on health.
Non-stationary equilibrum:
Economies may undergo a non-stationary equilibrium which can either be endogenous fluctuations (able to achieve a higher income and longevity) or complex dynamics (ended the opposite) depending on the existence of any policies being implemented. There are two crucial requirements for endogenous volatility to exist which are n(p) needs to be a convex function (with (A.1) and (A.2) hold) to ensure the function Kt+1=F(Kt) to fluctuate over time and p<0 to ensure the complementarity between the public and private inputs in health. To further understand the differences, we shall take South Korea and Philippines as the real examples.
In 1960s, South Korea and Philippines had almost the same economic conditions such as having approximately US$ 640 GDP per capita, percentage of those who attended college and the export proportion of primary commodities and manufactured goods but from 1970s onwards, South Korea had exceeded Philippines in many ways such as having income per capita growth of 6.2% per year compared to 1.8% of Philippines as well as the standard of living. There are five reasons for the great improvements witnessed in South Korea which are the improvements in the qualitative and quantitative schoolings including the embracement of general knowledge, the appreciation of learning-by-doing (the main factor), the intelligent product mix that involves continuous industrial shifts, brutal import substitutions through strict import cuts and export substitutions through technological advancements and grant supports from the USA such as the US$ 3100 m during the period 1945-1961 (Lucas 1993).
Using the Learning-by-doing theory (the parameter x of Ht=(Kt/Lt)^x) with x>0, South Korea was able to monotonically achieve higher k* (positive growth) and thus, longer life span (growth-mediated relationship) as the they were able to shift the threshold, k’ below their initial ko through government supports and policies as mentioned above. However, as time passed, South Korea may experience a constant increase in k (x=1) and eventually, a diminishing growth and thus, a reduction in longevity. This is true in reality as South Korea’s fourth most common form of death is suicide with the rate of 10 to 14.9 people in 100 000 (WHO, 2014) plus the ignorance of environmental issues. Furthermore, the decreased in government supports since 1990s, the adoption of rescue system which involved a reduction in public expenditure due to Asian crisis in 1997 and the ‘forced’ compliance to World Bank and IMF recommendations of free trade movements and privatisations in 1996 (ibid.) have theoretically threatened the stability of the threshold, k’. This can be shown in the figure 1 below where k’ shifts to k’’ due to the policies being taken which led to higher growth and longevity but eventually kt+1=F(kt) experiencing a diminishing marginal rate of growth over time.
Complex dynamics occur when an economy was unable to change their initial conditions due to the poverty trap like Philippines. Based on the figure 2, the threshold k’ for Philippines was not be able to be shifted below their initial capital per labour, kp to achieve a higher income and longevity due to less government supports and relatively high corruptions with the intensity of 30-39 (the lower, the higher the corruptions) for the past few years (Corruption Perception Index 2016). This theoretically would lead the economy to approach the zero income equilibrium.
However, these topological chaos seemed to only hold for the period 1960s-1990s and began to slowly breaking up from 2000s onwards where in 2013, Philippines GDP growth rate was the second highest in Asia at 6.6% (Keenan 2013) and has improved its global competitiveness by 10 points according to World Economic Forum (2012) and many believed this was due to efforts done by former president, Benigno Aquino in addressing the national issues including corruptions to make them internationally competitive especially in tourism industry and Small-medium enterprises. As what the former World Bank Country Director, Motoo Konishi said during the Philippines Development Forum in 2013, ‘The Philippines is no longer the sick man of East Asia, but the rising tiger’ (Keenan 2013).
However, there are many other areas they are still worst at such as in health care, roughly 60% of Filipinos die without ever seen a professional healthcare which related to the wide income inequalities and also, Philippines still have a low investment to GDP ratio of 19.7% in comparison with other South East Asia countries (ibid.).
To conclude, South Korea seemed to have challenged the club convergence hypothesis through brutal yet successful policies and for Philippines, despite realising the convergence hypothesis in early years, now began to slowly breaking up the hypothesis. However, surprisingly, the expected diminishing growth rate of South Korea provides us a glimpse of a possible realisation of the club convergence.
https://object.cato.org/sites/cato.org/file