The relationship between GDP and life expectancy isn't as simple as you might think
Everyone wants economic growth, right? It's part of every politician's package of promises. Expanding economies make people richer, and study after study shows that the wealthier lead happier , healthier lives.
Yet in recent years, accumulating evidence suggests that rising incomes and personal well-being are linked in the opposite way. It seems that economic growth actually kills people.
Christopher Ruhm, an economics professor at the University of Virginia, was one of the first to notice this paradox. In a 2000 paper , he showed that when the American economy is on an upswing, people suffer more medical problems and die faster; when the economy falters, people tend to live longer.
“It’s very puzzling,” says Adriana Lleras-Muney, an economics professor at the University of California, Los Angeles. “We know that people in rich countries live longer than people in poor countries. There’s a strong relationship between GDP and life expectancy, suggesting that more money is better. And yet, when the economy is doing well, when it’s growing faster than average, we find that more people are dying.”
In other words, there are great benefits to being wealthy. But the process of becoming wealthy — well, that seems to be dangerous.
Lleras-Muney and her colleagues, David Cutler of Harvard and Wei Huang of the National Bureau of Economic Research, believe they can explain why. They have conducted one of the most comprehensive investigations yet of this phenomenon, analyzing over 200 years of data from 32 countries. In a draft of their research, released last week, they lay out something of a grand unified theory of life, death and economic growth.
To start, the economists confirm that when a country's economic output — its GDP — is higher than expected, mortality rates are also higher than expected.
The relationship is clear, but the size of the effect is modest. In a year when the GDP is about 5 percent above trend — which is a respectable boom (think dot-com, not post-WWII) — adults are about 1 percent more likely to die.
Rising fortunes haven't always been linked to increasing mortality. Data from less-developed nations show that in places where farming is still the main economic activity, growth is associated with better, not worse health. The same is true when you look backward in history, before many countries fully industrialized. For instance, economists José Granados and Edward Ionides have shown that in the Sweden of the 1800s, economic growth was associated with longer lives — but in the 1900s, the relationship reversed, and growth became associated with death.
The turning point, Lleras-Muney and her colleagues say, comes when the wealth of societies increasingly starts to depend on factory output. They believe that pollution is a major culprit in increased mortality rates. To show this, they used data on carbon dioxide emissions, which are correlated with industrial activity and air pollution.
There's a common misperception, Lleras-Muney says, that pollution is a problem of the past in advanced industrialized countries such as the United States. But around the world, these relationships largely hold today.
The data show that when economies are growing particularly fast, emissions and pollution are also on the rise . After controlling for changes in air quality, the economists find that economic growth doesn’t seem to impact death rates as much. “As much as two-thirds of the adverse effect of booms may be the result of increased pollution,” they write.
This helps to explain why children seem to be particularly harmed by economic expansions — or benefit from recessions. The first years of life are precarious. Studies have shown that the very young are highly sensitive to pollution. Economists Kenneth Chay and Michael Greenstone estimate that the 1981-1982 oil shock recession may have saved as many as 2,500 infant lives in the United States, just through the slight reductions in air pollution caused by the reduced economic activity.
A booming economy spurs death in other ways too. People start to spend more time at their jobs, exposing them to occupational hazards, as well as the stress of overwork. People drive more, leading to an increase in traffic-related fatalities. People also drink more, causing health problems and accidents. In particular, the economists’ data suggest that alcohol-related mortality is the second-most important explanation, after pollution, for the connection between economic growth and death rates.
This is consistent with other studies finding that people are more likely to die right after they receive their tax rebates. More income makes it easier for people to pay for health care and other basic necessities, but it also makes it easier for people to engage in risky activities and hurt themselves.
Does all this evidence mean that we should celebrate recessions and fear economic expansions? Well, no.
Cutler, Huang and Lleras-Muney find that particularly large recessions (think the Great Depression) are still bad for people’s health, and particularly large booms (think the 1950s in America) lead to longer lives. It’s best to think about economic growth as a double-edged sword. On one hand, it leads to more pollution and risky behavior; on the other hand, the additional income allows people to invest in education and health, which yields tremendous payouts, just not always right away.
In the short term, or when the economic fluctuations are small, the harmful effects of growth dominate. But in the long term, or when the economic fluctuations are big, those harms are counterbalanced by the positive effects of having more income.
“If the pollution doesn’t kill you in the short run, then in the long run the increased income will help you live longer,” Lleras-Muney says.
The lesson here is not to be wary of growth, but to manage the downsides. The economists find that countries with better social safety nets are particularly good at buffering their residents from the health consequences of booms and recessions. It may also be that these kinds of countries are stricter about managing pollution levels.
All of this research should have us thinking about inequality. If growth is not wholly good, we should pay attention to who secures its blessings and who suffers the health consequences. In the United States, the financial rewards of economic expansion have mostly accrued to those at the very top, while average Americans have faced decades of stagnant wages. The question is: Have the health consequences accrued to the bottom?
SOURCE: World Economic Forum