Estonian Human Development Report

food. No less than 70% of smokers were content with the
smoking ban and 40% reported that they had considered
giving up smoking after the restrictions were enforced
(Klaster 2008).
2.8. The effect of health
on macroeconomics
Health is determined by genetic, economic, social, cultural,
and environmental factors. However, health can, in
turn, have an effect on the economy.
Figure 2.8.1. provides a simplified overview of how
health affects economic results in developed countries
mainly through four channels (both on the individual
and national level): improved productivity, a larger supply
of labour force, better skills attained through higher
education and better training, and more savings for
investment in physical and intellectual capital. These
four channels are depicted on the right hand side of the
figure.
The left side of the figure introduces the factors that
influence health: genetic background, lifestyle, living and
working conditions (including access to health services
and the use thereof, education, wealth, residence, profession),
as well as more general socio-economic, cultural,
and environmental conditions.
It is important to keep in mind the positive feedback
from income to health when analyzing the effect
of health on economic development. Wealth can affect
health in two ways: directly through material circumstances
which facilitate the development of health and
also through its influence on social involvement, the
opportunity to exercise control over the situations
encountered in one’s life as well as one’s sense of security.
If an individual’s income is higher than a certain
base level, its importance may lie primarily in its connection
to other social and psychological factors, especially
in societies where social involvement relies heavily
on one’s income (Marmot 2002).
The ties between health and macroeconomics in Estonia
were studied in a 2006 research project conducted
jointly by the PRAXIS Center for Policy Studies, the World
Health Organization, and the Ministry of Social Affairs of
the Republic of Estonia (Suhrcke at al. 2006). The results
of the analysis published in the study indicate that the
state of health of adults affects economic productivity at
the level of the individual, the household, and the national
economy. The main conclusion of the analysis is that a bad
assessment of one’s health has a negative effect on all three
of the labour market results.
First of all, the likelihood of people offering their
labour force is smaller if their state of health is satisfactory.
In Estonia, 40,000–50,000 people, i.e. 6–7% of the labour
force (aged 15–74) are inactive due to an illness, injury or
disability. Since 1997, this percentage has remained relatively
stable with a slight upward trend. Naturally, the
largest percentage of the inactive segment falls into the
50–74 age group (Statistics Estonia 2008). Men with a bad
state of health are almost 40% less likely to participate in
the labour market than men whose state of health is good.
Among women, the corresponding indicator is 30% (Table
2.8.1.).
The same study also revealed a strong connection between
the state of health and leaving the labour force in the case of
both men and women. Thus, bad health increased the likelihood
of a person leaving the labour force in the next couple of
years by 6.4% among men and 5.6% among women, compared to
those respondents who did not characterize their state of health
as bad.
However, according to economic theory, health does not
have an unambiguous effect on the supply of labour force. On
the one hand, smaller salaries paid due to bad health and lower
productivity can lead to a smaller supply of labour force as staying
home becomes relatively more attractive due to the low
income. On the other hand, the decrease in income due to lower
productivity may motivate people to compensate by supplying
Figure 2.8.1. Connections between health
and the economy
Lifestyle
Education
Health care
Wealth
Other
socio-economic
factors
Genetics
Environment
Source: Suhrcke et al. 2006
HEALTH
Productivity
Labour force
supply
Education
Real
investments
ECONOMIC
RESULTS
Table 2.8.1. The connection between participation
in the labour force and state of health, compared to
people with a good state of health (marginal effects)
Note: *** significant at 1%
Source: Suhrcke et al. 2006
Men
Women
Satisfactory health -10%*** -15%***
Bad health -39%*** -29%***
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