The Economic Burden of Non-Communicable Diseases

The global burden of non-communicable diseases (NCDs) is expected to increase in the coming decades as the total global population rises along with the proportion of the population in older age groups. The overall impact of chronic disease on population health in developing countries will be substantial, particularly for conditions such as hypertension and cardiovascular disease. Many low and middle income countries are in the midst of an epidemiological transition, with the dominant cause of mortality shifting from infectious disease to NCDs, and a rise in the average age at death. In some cases, urbanisation and rapid economic development have brought behavioural and lifestyle changes, leading to a rise in the prevalence of NCD risk factors such as smoking, poor diet, and sedentary lifestyles. Globally, NCDs are responsible for 66 percent of all mortality, and account for 54 percent of healthy life years lost, as measured by Disability-Adjusted Life Years (DALYs). 

There is a substantial amount of existing evidence on the impact of NCDs on individual wellbeing, however there is less evidence on the economic effect of chronic disease on society as a whole. NCDs can impact on growth in a number of ways, including through reduced reductions in effective labour supply (including productivity, early retirement, and morality), diversion of productive savings towards medical expenditure, and reduced government capacity to invest in infrastructure or education. 

In a recent report for the World Economic Forum (Economics of Non-Communicable Diseases in Indonesia, Bloom, D. E., Chen S., McGovern M., Prettner K., Candeias V., Bernaert A. and Cristin S., World Economic Forum, 2015), we estimate the economic burden of NCDs in Indonesia over the period 2012-2030 to be $ 4.47 trillion. 

http://www.weforum.org/reports/economics-non-communicable-diseases-indonesia

Summaries of the report are available here:

http://blogs.wsj.com/briefly/2015/04/21/the-cost-of-chronic-disease-in-indonesia-the-numbers/

http://www.cnbc.com/id/102603446

Details of the methodology are provided in our earlier paper:

Bloom, David E., et al. "The macroeconomic impact of non-communicable diseases in China and India: Estimates, projections, and comparisons." The Journal of the Economics of Ageing 4 (2014): 100-111. http://www.sciencedirect.com/science/article/pii/S2212828X14000206

 

See also our non-technical summary:

Bloom, D.E., Cafiero-Fonseca, E.T., McGovern, M.E., Prettner, K. (2014): "China and India's Decent into Chronic Disease: Killing Themselves Slowly." The Milken Institute Review, Q2, 2014. http://assets1c.milkeninstitute.org/assets/Publication/MIReview/PDF/24-33MR62.pdf  

Demography and Inequality

 As discussed in this week's Economist:

As a country’s birthrate declines, people of working age make up a larger share of the population, which can fuel economic improvement. But a new study by Harvard School of Public Health researchers finds that lower birthrates raise income inequality within countries in the short-term; the birth rate of the wealthy begins to decline first and, according to the researchers, they are the first to reap the benefits of demographic change.

Microeconomic Foundations of the Demographic Dividend

David E. Bloom, David Canning, Günther Fink, Jocelyn E. Finlay

Abstract

The potential economic returns to the demographic transition are high. As countries move from a steady state with high mortality and high fertility to an equilibrium with low mortality and fewer children, lower dependency ratios, higher investment in human and physical capital as well as increased female labor force participation contribute to economic growth. In this paper, we analyze the demographic transition at the household level, investigating the distributional patterns of the economic and welfare benefits associated with the demographic transition across socioeconomic groups within countries and over time. We find large differences in the effects of the demographic transition across socioeconomic status (SES) groups in the early stages of the demographic transition, but also substantial behavioral change across all groups during phases of rapid fertility decline, so that the long-run effects of the demographic transition on inequality remain ambiguous.

http://www.hsph.harvard.edu/pgda/WorkingPapers/2012/PGDA_WP_93.pdf

http://www.economist.com/node/21560247

http://www.economist.com/blogs/freeexchange/2012/08/demography-and-inequality

Lawyers and Economic Growth

Certain aspects of the legal profession get a lot of stick, some would say rightly so. While reading Robert Frank's Luxury Fever recently I came across this paper which suggests that this prejudice has an empirical basis, more lawyers reduce growth.

The Allocation of Talent: Implications for Growth

Kevin M. Murphy, Andrei Shleifer and Robert W. Vishny

Abstract

A country's most talented people typically organize production by others, so they can spread their ability advantage over a larger scale. When they start firms, they innovate and foster growth, but when they become rent seekers, they only redistribute wealth and reduce growth. Occupational choice depends on returns to ability and to scale in each sector, on market size, and on compensation contracts. In most countries, rent seeking rewards talent more than entrepreneurship does, leading to stagnation. Our evidence shows that countries with a higher proportion of engineering college majors grow faster; whereas countries with a higher proportion of law concentrators grow more slowly.

Quarterly Journal of Economics, 1991, Volume106, Issue2, Pp. 503-530

Brooks on the Great Stagnation

Stagnation is what occurs when all the low-hanging fruit of economic development has been picked. David Brooks gives a pithy account of Tyler Cowen's Great Stagnation. In the Irish case, we had two decades of huge improvement in childhood conditions in the 1940s and 1950s, which were low-hanging fruit to some extent, and two decades of substantial increases in the educational attainment at secondary school level following that. We also had rapid infrastructural improvement and increases in college attendance throughout the 1990s, combined with many tax advantages to encourage investment in Ireland. We probably had the equivalent of Cowen's Great Stagnation by the beginning of the century. Our solution to arresting the decline, unfortunately, turned out a little pear-shaped.