Health and economic development since 1900

The 20th century has brought unprecedented gains in health. While these have improved citizens’ lives worldwide, progress has been uneven and have in turn led to substantial cross-country health inequalities. This article looks at the effects of these inequalities on between-country economic inequality since 1900 using a level accounting framework that includes life expectancy as an important part of human capital besides education. The main results show that health has been a historically important source of cross-country income variation. In 1900 and 1955, differences in life expectancy accounted for almost 20 percent and a quarter of between-country income inequality. In addition, I find that the reduction of cross-country health differentials between mid-20th century and 1990 was an important source of income convergence. In a counterfactual exercise, I show that between-country income inequality would have been almost 20 percent higher nowadays, had the process of health convergence after 1955 not taken place. Finally, I find that the relative importance of health for income levels has stayed constant in the last three decades due to a deceleration in the rate of health convergence.