Health Accounting: An Introductory Note

Abstract Background: Economic growth and public health are inextricably linked. This complex relationship is at the heart of our understanding of the social determinants of health at macroeconomic level. Better knowledge about the consequences of economic growth on the population’s health conditions may aid both academics and policy maker in developing policies to improve people’s quality of life. Methods: In economics it is usual to model people’s health status as a function of the causes of health using a production function. Following this standard approach, in this paper we attempt to develop a ‘health accounting’ framework. In particular, we utilise the concepts of income and output elasticity to investigate the channels through which economic growth affects the population’s health conditions. Results: We introduce a basic technique to break up the influence of economic growth on the population’s health conditions into three main components: 1) a ‘resources effect’; 2) a ‘behaviours effect’; 3) and a ‘knowledge effect’. Each of these effects is the product of two elasticities: the output and income elasticity of the fundamental factors influencing public health: health care, health-related lifestyle, and medical knowledge. Conclusions: This paper provides a simple but coherent framework useful for describing and measuring the role of economic structural changes in determining public health. This health accounting approach allows us to investigate how the long-run macroeconomic evolution of a country’s is able to affect the general health conditions of its population.