Wealthier is Healthier

Abstract

We estimate the effect of income on health using cross-country, time-series data on health (infant and child mortality and life expectancy) and income per capita. We use instrumental variables estimates using exogenous determinants of income growth to identify the pure income effect on health, isolated from reverse causation or incidental association. The long-run income elasticity of infant and child mortality in developing countries lies between -0.2 and -0.4. Using these estimates, we calculate that over a half a million child deaths in the developing world in 1990 alone can be attributed to the poor economic performance in the 1980s.