7 - Health, Human Capital, and Its Contribution to Economic Growth

Summary

This chapter proposes a framework for estimating the investment in human capital from health improvement or activities that improve life expectancy and reduce morbidity rates. The measurement framework builds on and extends the Jorgenson-Fraumeni income-based approach for estimating human capital to account for the effect of health on human capital. This economic approach to measuring health human capital differs from the welfare-based approach that estimates the economic effect of health improvements on the quality of life and well-being of individuals. The framework is then implemented for Canada, and the investment in health human capital for the period from 1970 to 2020 is estimated. The estimated investment in health human capital based on the income approach was found to be lower than health expenditures in Canada. This suggests that much of the health expenditures should be classified as consumption rather than as an investment that increases earnings.