Health and Economic Growth: Reconciling the Micro and Macro Evidence

Working Paper

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CDDRL Working Papers

February, 2005

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We compare the estimated effects of health in a macroeconomic production function model of economic growth with the effects that are found using calibration based on wage regressions. We allow for gradual adjustment in income level towards the steady state which means that both the level and growth of inputs can affect economic growth. We find that the estimated macroeconomic effects of health are positive, and not significantly different from the microeconomic estimates. We find similar results for education provided we instrument schooling levels with literacy rates to correct for measurement error.

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