Economic consequences of non-communicable diseases and injuries in Russia

Economic consequences of non-communicable

diseases and injuries in Russia

European Health ForumBad Gastein, 7 October 2005

Marc [email protected]

WHO European Office for Investment for Health and Development (Venice)

Based on a report for the World Bank by:M Suhrcke, L Rocco, M McKee,

D Urban, S Mazzucco, A Steinherr

Venice does offer opportunities…

..but the challenges are many more

I.

II.

Sustainable economic growth without health in

Russia?

500

1000

1500

2000

2500

3000

1998 1999 2000 2001 2002 2003

64

65

66

67

68

GNI pc Atlas method current US$

Life expectancy at birth

Source: World Bank WDI 2005; WHO/EURO HFA database 2005

Highly unlikely to work!

In light of recent research and of the work undertaken for the present study!

Policy implication: Invest in health FOR economic development!

Outline of presentation

1. A conceptual framework2. Empirical evidence on the economic

consequences of NCDs and injuries• Past and current impact of adult ill-

health on economic outcomes• Projected economic benefits of

improving adult health

3. Conclusions and critique

1. A conceptual framework

Relevant channels from health to the economy: a simple

framework

ECONOMYHEALTH

Labour productivity

Labour supply

Education

Saving

2. Empirical evidence on the economic

consequences of NCDs and injuries

Past and current impact of adult ill-health on economic

outcomesAbsenteeism from work due to illness

The impact of ill health on labour productivity and supply

The impact of chronic illness on early retirement

The impact of chronic illness on household incomesThe impact of alcohol consumption on job loss

The impact of premature death on the remaining household members

Annual days of absence due to illness per employee:

Russia vs. EU15

10.8

9.58.6

9.69.2

10.910.3

9.4

0

2

4

6

8

10

12

14

2000 2001 2002 2003

Male

Female

EU-15: 7.9(M: 6.9, F: 9.0)

Source: calculations based on RLMS rounds 2000-2003; EU-15 value is from ESWLC 2000

Costs of absenteeism due to illness in Russia

Source: Suhrcke/Rocco/McKee et al (2005), calculations based on RLMS absenteeism data

2003

Total wage loss (US$ billion)

60.96

Total wage loss as share in GDP

0.71%

Total production (GDP) loss (US$ billion)

112.87

Total production loss as share in GDP

1.31%

The impact of ill health on labour productivity and

supply Using various methodologies we find fairly robust results confirming that:

Among jobholders adult health appears to have had a significant and sizable impact on labour productivity, but less so on labour supplyEx.1: “Self-reported good health increases the wage rates by 22% for women and by 18% for men, compared to those who were not in good health”

Ex.2: “A workday missed due to illness reduces the wage rate by 5.5% for females and 3.7% for

males”

The impact of chronic illness on early retirement

Probability of retiring in subsequent period for average male individual:

Source: Panel logit regression as described in Suhrcke/Rocco/McKee et al. 2005

0.18 0.18 0.21

0.29

0.23

0.40

0.32

0.56

0.43

0.62

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

> 95th 75th - 95th 50th - 75th 25th - 50th < 25th

I ncome percentiles

Not chronically ill

Chronically ill

Richest Poorest

Projected economic benefitsof improving adult health

1) Definition of plausible future scenarios

2) Economic valuation of these future scenarios

1) Definition of plausible future scenarios for adult mortality due to NCD and injuries up to 2025:

Scenario 1: Reach today’s EU-15 rates by 2025Scenario 2: Annual percentage reduction of mortality rates at half the rate of scenario 1Scenario 3: No change in mortality rates

Mortality rates (per 100,000) due to NCDs and injuries (age

15-64): 3 scenarios

Source: calculations based on WHO Mortality Database

0

100

200

300

400

500

600

700

800

900

1000

Scenario 3

Scenario 2

Scenario 1

Benchmark EU-15 (2001)

2) Economic valuation of these future scenarios

a) Static economic benefits

b) Static welfare or “full income” benefits

c) Dynamic economic benefits

a) Static economic benefits

Share of benefits in GDP

NCDs 3.4%

Injuries 2.0%

NCDs + Injuries 5.0%

Scenario 3 (“reach EU15 by 2025”)

Note: future benefits discounted at 3%, and assumed growth rate of GDP pc of 3% p.a.Source: Suhrcke/Rocco/McKee et al 2005

c) Dynamic economic benefits

…assessing the impact of adult health on economic GROWTH!

…based on existing empirical relationship between adult mortality and economic growth worldwide!

The empirical relationship between adult mortality and economic growth worldwide

(1960-2000):Dependent variable: GDP per capita

Estimate 1 (OLS)

Estimate 2 (FE)

Lagged-GDP p.c. .86*** .65***

Lagged fertility rate

-.05 -.17***

Openness .16*** -

Lagged adult mortality rate

-.08** -.18***

R2 0.97 0.98

No. of observations 302 332

Source: Suhrcke/Rocco/McKee et al 2005Note: *** = 1%-significance level, ** = 2%-significance level

Applying these relationships to forecast the impact of adult mortality reduction in

Russia on economic growthPredicted GDP per capita based

on estimation 1 (OLS):

7,000

9,000

11,000

13,000

15,000

17,000

Scenario 3Scenario 2Scenario 1

Source: Suhrcke/Rocco/McKee et al 2005

3. Conclusions and critique

Sustainable economic growth without health in

Russia?

500

1000

1500

2000

2500

3000

1998 1999 2000 2001 2002 2003

64

65

66

67

68

GNI pc Atlas method current US$

Life expectancy at birth

Source: World Bank WDI 2005; WHO/EURO HFA database 2005

Investing in adult health is a key determinant of economic outcomes at the individual and the macroeconomic level – in other countries AND in the Russian Federation

Given the major scope for adult health improvements there are indeed substantial health AND ECONOMIC benefits to be reaped from investing in adult health – most likely even more so in Russia than elsewhere

In light of the substantial magnitude of economic benefits, any well-designed efforts devoted to promote health in Russia – both in and outside the health system would produce a significant economic return

Critique