Unraveling the Importance of Public Health Investments in Poor Countries

Saatwik Panigrahi
5 min readAug 3, 2020


“It is the health that is the real wealth and not the gold and silver pieces” — Mahatma Gandhi

The world is witnessing two contrasting scenarios, with the fertility rate declining below critical levels in most industrialised and developing nations of the world, accompanied with an upsurge in the population levels of poor countries. The shrinkage of workforce growth has also not bereft India and China of this trend. However, the statistics is not applicable in the poorer Sub-Saharan countries, with estimates predicting a quadrupling of their population. Economic growth is a function of labor productivity and labor force population. In the book ‘The Rise and Fall of Nations’, Ruchir Sharma has proven that population growth is a prerequisite for economic growth in most instances, barring the ones that have achieving the latter through productivity improvements facilitated by alternative means. In the 1960s and 70s, poor African countries have witnessed famines, high unemployment, civic strife etc. alongside the explosion of the ‘population bomb’. The success of population growth as a stimulator of economic growth rests on the success of institutional arrangement and government policy in mobilising human capital into the country’s workforce. Thus, it is to the discretion of the country, whether to treat its population as an asset or liability.

According to estimates by Arrow and his colleagues, the contribution of five sectors — education, natural resources, climate (carbon damages), physical capital (machines, buildings, etc.) and health — to wealth, they found that improved health contributes more to wealth than the other sectors combined.

Poor countries encounter a vicious cycle of health-based debt trap, thus pulling down the incomes of the people and trapping them in a situation that cannot be broken unless external forces like government spending, technology free them from the manacles of debt and poor health due to an out-of-pocket market driven healthcare model. In poorer countries, this is popularly known as demographic trap. Appropriate government interventions aimed at breaking this cycle often create a large array of positive externalities in the form of increased levels of school attendance, better knowledge and skills, higher worker productivity, thus greater output and hence economic development of a country.

In the book, ‘The End of Poverty’, Jeffery Sachs highlights the effects of disease incidence in poor African countries. For instance, the case of Malaria has shown that countries like Zambia, Cote de Ivoire etc. has per-capita incomes almost a third of that in countries that were not exposed to Malaria. According to the view of Sachs, public health investments in preventive healthcare Malaria for Malaria translate into high returns in form of increased labor productivity, increase in incomes etc. , that would eventually compensate for policy interventions of the government. Mills and Shillcutt estimate that every dollar spent on malaria control has brought a return of $2 to $5. A study of six countries in Sub-Saharan Africa found that malaria led to a loss in GDP growth ranging from 0.4% of GDP in Ghana to 9% of GDP in Chad.

This outcome can be further strengthened by the findings by Monica Jain on the data of National Family Health Survey in India , which found a positive linearity between nutrition, productivity, and wages. This conclusion lends credibility to the claim that taking care of young children is sound economics for a long-term health and economic status of the country. Sub-Saharan countries have an undernutrition rate of 25%, which is much higher as compared to the WHO norms and the average of 12% in most parts of the world. According to a research by Fink G, Rockers PC children with stunted growth in countries like Ethiopia, Peru, India, Vietnam etc.complete fewer years of schooling. Evidences from Tanzania and Guatemala lend support to this argument by proving that children whose nutritional requirements had been fulfilled had a lower probability of being under poverty, had higher hourly wages and attained better educational outcomes.

Immunization rates are a very appropriate predictor of the country’s health status. It has been estimated that scaling-up vaccination against six childhood diseases from 2011 to 2020 in 72 developing countries could avert $6.2 billion in treatment costs and $145 billion in productivity losses. Sub-Saharan and least-developed countries have outshined countries like India, in terms of these averages. According several studies in South Africa, Bangladesh, and Philippines, immunization has resulted in better household economic returns, greater years of schooling, and better cognitive functions in children.

Reducing pollution levels is associated with increased labor force participation and earnings. For example, in the US, a decrease in ozone concentration of 10 parts per billion was associated with a 4.2% increase in productivity among agricultural sector workers.

According to two studies by Karan.A and Thirumurthy.H , there is strong evidence that HIV treatment yields great economic returns, mostly through increasing participation in the workforce of a country. Households affected by CVD in India have higher health spending, rely more on selling assets and borrowing to pay for healthcare, and have lower employment rates than households unaffected by the disease.

There are large indirect costs associated with chronic illness, including income and productivity losses among patients and family carers. In India, out-of- pocket spending on NCDs increased as a proportion of all out-of-pocket spending from 32% in 1995–1996 to 47% in 2004; the odds of catastrophic hospitalisation expenditures for cancer was nearly 170% greater; and for CVD and injuries was 22% greater than the odds of hospitalisation due to communicable diseases.

Source : World Bank

According to World Bank data on Domestic general government health expenditure per capita, PPP (current international $) — Sub-Saharan Africa and GDP, PPP (current international $), a dataset for 9 years showed an estimated correlation of 0.967, thus showing the strong positive correlation between public investment in health and corresponding GDP figures.


Poor countries should change their focus from climbing the ladders of economic growth, and instead should focus on the long-term growth strategy of human capital development through increased public investments in health through various means. An effective functional insurance sector would deter out-of-pocket payment system, thus preventing health poverty and leading to better health outcomes.



Saatwik Panigrahi

Economics and Mathematics @ New York University