Question 6.84

image 49. The positive correlation between health ® and income per capita is one of the best-known relations in international development. This correlation is commonly thought to reflect a causal link running from income to health…. Recently, however, another intriguing possibility has emerged: that the health-income correlation is partly explained by a causal link running the other way—from health to income” [D. E. Bloom and D. Canning, The health and wealth of nations, Science, 287 (2000): 1207–1208]. Explain how higher income in a nation can cause better health. Then explain how better health can cause higher national income. There is no simple way to determine the direction of the link.

49.

Sample response: Higher income means that more money can be spent on health care, which leads to overall better health. On the other hand, better health means workers can be more productive (because they feel good) and will take fewer days off due to illness. The higher productivity and higher number of work days will lead to a higher national income.