Medical Tourism in Developing Countries

32 ● Medical Tourism in Developing Countriesstarting with the discussion between Arthur Lewis and Albert Hirshman inthe 1950s. 46 Lewis contended that savings and investment was crucial fordevelopment while Hirshman said that development was crucial for savingsand investment. Afterwards, questions of diminishing returns to investmentin physical capital were followed by endogenous growth theories claimingthat the accumulation of knowledge could offset diminishing returns.Whichever comes first, Meier and Rauch state, “Few doubt that investmentin physical and human capital, financed primarily by domestic savings, iscrucial to the process of economic development.” 47 One group of scholarsdefined capital as including not just physical capital, but also human capital.Both Lucas (1988) and Romer (1986) argued that knowledge andhuman capital added to growth because they increased productivity, sosocieties that invest more in human capital will have more growth. 48Grossman and Helpman argued that growth then follows from investmentin education of future workers and training of existing ones. 49In the discussion of human capital, two concerns are raised for developingcountries. The first has to do with the production of human capital,and the second has to do with its retention. Indeed, it is not just a questionof training workers, but also keeping them so that they do not leave andcontribute to another country’s labor force. While the particulars of howdestination countries train and retain their health tourism workers is discussedin chapter 5, suffice it to say here that in order for a country toretain its trained workers, it needs to be able to provide them with employment.Medical tourism is an industry that provides work for both skilledand unskilled workers. While that is true for nonmedical tourism also, theproportions are very different, as much of nonmedical tourism occurs inthe informal sector in which jobs are labor intensive and low paying. 50The Multiplier EffectTrade and foreign investment in medical and nonmedical tourism contributedirectly to raising the gross domestic product. They also have a multipliereffect insofar as they result in forward and backward linkagesthroughout the economy. The arrival of a tourist/patient has linkages thatresult in industrialization extending well beyond the tourist/health sectors,as well as rises in employment, incomes, and aggregate demand. These inturn increase production, employment, and income as the country moveson a growth trajectory. While sales and output multipliers are relevant,employment and income multipliers are the most important measure oftourism’s role in economic growth. They measure the ratio of the initialincrease in tourism expenditure to its final impact on employment or