The Impact of Poor Health on Total Factor Productivity:

An Empirical Investigation

Matthew A. Cole¹ and Eric Neumayer²

Abstract:

A number of recent studies have illustrated the link between health and growth (Gallup and Sachs 2000, McCarthy et al. 2000, Bhargava et al. 2000). This paper argues that a key mechanism through which health affects growth is via total factor productivity (TFP). Two measures of TFP are estimated using alternative production function specifications. We then estimate the determinants of TFP, paying particular attention to three indicators of health that are particularly problematic in developing regions: malnutrition, malaria and waterborne diseases. We find the impact of poor health on TFP to be negative, significant, and robust across a wide variety of specifications.

JEL classification: O47, I12

Keywords: Total factor productivity, disease, health, underdevelopment

¹ Department of Economics, University of Birmingham, Edgbaston, Birmingham, B15 2TT, UK. Tel. 44 121 414 6639, Fax: 44 121 414 7377, E-mail: m.a.cole.1@bham.ac.uk (corresponding author)

² Department of Geography and Environment, London School of Economics and Political Science