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Forum on Economic
Reform
In recent decades the alliance of neoclassical economics and neoliberalism has hijacked the term “economic
reform”. By presenting political
choices as market necessities, they have subverted public debate about what
economic policy changes are possible and are or are not desirable. This venue promotes discussion of economic
reform that is not limited to the one ideological point of view.
The Malaria Gap
Pia Malaney, Andrew Spielman, and
Jeffrey Sachs
(Harvard University,
Harvard School of Public Health, Columbia University, USA)
Copyright © 2004 by The American Society of Tropical Medicine and Hygiene
Introduction: Malaria And The World Twice
Given
Would an Africa free of malaria still be just as poor? If the continent were
rich, would its malaria still be endemic?
The scientist-philosopher Ernst Mach once remarked that “the world is
given only once” in an effort to discourage undue effort spent on such
counterfactuals. In the case of malaria, however, the planet can be divided
into those regions that are malarious and those that
are not, and from the point of view of both public health and economic
development, these regions often resemble separate worlds.
The frequently cited case of sickle cell anemia is but
the most dramatic example of the extent to which malaria changes the lives of
those it afflicts: how better to evince the power of the parasite than with a
potentially lethal modification of the genetic code as a desperate Darwinian defense against the even more deadly ravages of malaria?
Accordingly, it may be expected that a force strong enough to rewrite our DNA
will rewrite many of the lives and economies that it touches. It is no
exaggeration to say that where malaria is present, it can be expected to
affect diverse features of human existence including mobility, investment
choices, and even fertility decisions.
We are not powerless to face this force of nature; from simple mosquito coils
to investment in the development of a vaccine, there are numerous measures
that may reduce or eliminate the threat posed by malaria. The economic
dimension enters the picture precisely because these measures are not all
equally effective, and none is without cost. It is in evaluating the
appropriate level of resources that should be devoted toward anti-malaria
interventions that the economist must ask “What would the sphere of economic behavior look like in the absence of malaria?” Answering
this question provides the first step towards a comprehensive cost-benefit
analysis.
Because the effects of malaria can pervade the fabric of human endeavor, however, it is not surprising that the current
state of economic analysis has yet to provide a definitive accounting. To
begin with, the state of the art for costing a disease like malaria has not
progressed to the point where a dominant paradigm can be said to exist.
Rather, there are competing schools of thought, each of which directly
addresses some piece of the puzzle while leaving other aspects of the problem
to alternative methodologies.
Recent attempts to assess the economic burden of malaria by means of
cross-country regression analysis have found the disease to be a significant
factor in long-term economic growth and development.1,2 The nature
of the macroeconomic approach, however, is such that it functions
independently of chains of causation and so cannot shed much light on the
underlying mechanisms through which these costs are incurred. As a first
approximation, one might anticipate that the cost of malaria at a national
level would be an aggregation of the burden borne at the household level.
Microeconomic analyses that seek to estimate the burden of malaria on
households generally conclude that the effect of this disease is, in fact,
quite large and particularly burdensome for the “poorest of the poor.” The
costs of prevention, treatment, and the loss of productivity as a result of
malaria-related morbidity and mortality can represent a significant portion
of the annual income of poor agricultural households. When aggregated to
provide estimates of the burden of disease at a national level, however, the
results are considerably smaller than those of cross-country estimates.
Potentially large economic costs, therefore, appear to escape microeconomic
analyses, implying that there are negative externalities that render the
overall burden of malaria greater than its direct impact on individuals and
on households.3
The extent of the economic burden imposed by malaria as well as the
mechanisms through which these costs are imposed are relevant to health
policy. The main reason for allocating resources towards malaria prevention
and treatment is undoubtedly the significant cost that it represents in human
terms. In trading off between equally deserving demands on health budgets,
and more broadly, development budgets, however, an understanding of the
extent of the economic impact of an investment in anti-malaria interventions
becomes important. If intense malaria results in a considerable negative
impact on economic growth, any reduction in this burden can ultimately
promote a cycle of health and wealth that may improve standards of living.
The very difference between the estimates of the economic burden deriving
from microeconomic studies and from macroeconomic crosscountry
regressions provides insight into the mechanisms through which malaria
inhibits development. To the extent that malaria-related costs are external
to the household unit, private expenditures allocated towards its reduction
will be insufficient, and public support for anti-malaria interventions will
be all the more critical.
The difference between the macroeconomic, or “topdown”
approach and the microeconomic, or “bottom-up” approach for assessing the
economic burden of malaria serves as the focus for the following analysis.
Toward this end, we shall identify factors that may explain the apparent
“malaria gap” that separates these estimates.
Economic Methodologies For Evaluating
The Burden Of Malaria
Understanding the conditions that permit long-term economic growth is a
central focus of economic research. There have been a number of attempts to
explain the nearly hundred-fold difference in per capita incomes between the
richest and the poorest countries. The many explanations for the difference
that economists have explored include such factors as demographic structures,
cultural practices, education, openness to trade, and legal and economic
institutions.4–7 Although economists favor
diverse explanations, more recent explanations have included an increased
focus on the role of health, and in particular of malaria. Indeed, poverty
and malaria appear to go hand in hand, the world over. The per capita gross
domestic product (GDP) (adjusted for differences in purchasing power) in
highly malarious countries is on average one-fifth
that of non-endemic countries.2 In fact, recent macroeconomic
studies have found that the growth rate of per capita GDP in malarious countries is 0.25–1.3% points lower per year
than that of non-malarious countries, even after
controlling for the impact of such factors as savings rates, economic and
political institutions, and education levels of the population. Over a period
of 25 years this can amount to almost half of the per capita GDP of poor
countries.
Although macroeconomic studies suggest that malaria greatly inhibits economic
growth, they cannot specify the mechanisms through which this happens. Their
microeconomic counterparts attempt to provide national estimates by assessing
the cost of malaria accrued by individual households and aggregating these
estimates across households. This more conventional approach to assessing the
burden of disease has been applied in numerous studies worldwide. An early
20th century calculation of the cost of malaria in the United States estimated
the overall burden at US $100 million in 1917 dollars.8 Since
then, many area-specific studies ranging from South and Southeast Asia to
Latin America and Africa have attempted to assess the costs imposed by
malaria both on households and populations. The conclusions differ
considerably, in part due to variations in methodology, but also to diverse
patterns of endemicity and differences associated
with the particular species of parasite involved. Of the several kinds of
malaria parasites that infect people, Plasmodium falciparum
produces a disease that is far more severe than that of the others, and the
resulting costs reflect these differences. Similarly, the nature of the costs
associated with the disease also change based on levels of endemicity. In highly endemic regions, mortality occurs
mainly among infants and young children, while survival incrementally conveys
diseasemodifying immunity. In addition to the
unacceptable suffering associated with high infant and child mortality rates,
they potentially have long-term effects on demographic and economic outcomes.
Direct productivity losses, however, are less severe in such an environment
than where transmission is less stable, where herd immunity is less, and
where malariaassociated disease burdens people of
all ages.
The most frequent approach toward evaluating the economic burden of malaria
has been the cost-of-illness (COI) method. Such analyses attempt to account
for the direct as well as indirect costs associated with an illness. Direct
costs are private as well as non-private medical care costs. Private costs
include private expenditures on prevention, diagnosis, treatment, and on case
management. These could be such expenses as those required for bed nets,
doctor’s fees, the cost of anti-malaria drugs, the cost of transportation to
medical facilities, and necessary support for the patient. Costs borne by an
accompanying adult may be included, and these would be calculated over the
duration of that person’s stay at the facility. Non-private medical care
costs include public expenditures on prevention and on treatment of the
resulting disease and would be comprised of governmental expenditures on such
measures as vector control, health facilities, education, and research.
Indirect cost calculations include productivity losses associated with
malaria-attributed illness. Such costs are measured by estimating any income
that may be foregone due to illness or death. In the case of mortality,
foregone income is estimated by calculating the capitalized value of future
earnings over the anticipated life-span of those who died prematurely as a
result of malaria, based on projected incomes for different age groups, basic
longevity estimates, and agespecific mortality
rates. The indirect cost of morbidity is the value of lost workdays for each
person with malaria and malaria- related illness, and this is calculated
using similar methods. The standard formula for the COI method of calculating
the cost of a disease is COI = Private Medical Costs + Non- Private Medical
Costs + Foregone Income + Pain and Suffering.
The outcomes of previous COI studies on malaria have varied, based not only
on such factors as the endemicity of the infection
in the study locale, which actually does affect the cost of the disease, but
also the particulars of the way in which the methodology was applied. A
comprehensive example of this is represented by a collection of case studies
conducted within Africa, where the cost of malaria was estimated using the
COI formula in Burkina Faso, Chad, the Republic of the Congo, and Rwanda.
Each study used data available within the country, modifying the formula and
components as necessary.9 These studies indicated that a case of
malaria in Africa cost $9.84 in 1987, of which $1.83 was direct and $8.01 was
accrued indirectly as a result of foregone income associated with malaria
morbidity and mortality. The total estimated cost of $0.8 billion represented
0.6% of the GDP of sub-Saharan African economies. An increase in this burden
to 1% of the GDP in 1995 was predicted.
Although COI analyses generally find that the economic burden of malaria is
less than macroeconomic results would suggest, they do demonstrate that the
costs of malaria fall particularly heavily on the poor because the direct and
indirect costs of a single case often represents a significant portion of a
person’s income. A household survey conducted in Malawi focused on the costs
of malaria for low-income households.10 In a sample of households
with a mean annual household income of $115, the costs of malaria prevention
and treatment, added to the foregone income from adult morbidity and
caretaking for children with the disease, represent about 20% of annual
income.
Although the COI approach theoretically includes the cost of pain and suffering,
it is generally excluded from calculations because it is difficult to assess.
An approach that is better designed to access these and other less tangible
costs is the willingness-to-pay (WTP) approach, in
which analysts attempt, by means of household surveys, to determine the value
that a household would place on avoiding the disease. If it were possible to
elicit such a dollar value, treatment costs and lost productivity would
presumably be captured, as well as the value of lost leisure time, the cost
of the pain and suffering associated with malaria, and other intangible costs
that might be difficult to estimate. The WTP
approach, which was developed originally to assign values to such public
goods as environmental quality, has come under much criticism in the context
of “existence” values, which do not derive from private consumption of a
good.11,12 Such values may be subject to personal interpretation
and can be biased by respondents’ desire to engage in strategic behavior. It is possible, however, to avoid some of these
pitfalls through the use of a carefully constructed survey with closed-ended
questions that place the issue in a market context. In one such study
conducted in Tigray, Ethiopia, poor, agricultural
households were found to be willing to pay about 16% of their annual income
for a hypothetical malaria vaccine, or about two to three times as much as
would be suggested by a COI calculation for the same sample.13
The COI approach also fails to account for lost productivity in the event
that patients must return to work before they have fully recovered from a
malaria episode and are therefore less effective. Indeed, in intensely
endemic regions, many residents sustain chronic infection even though they
appear to be non-symptomatic. It seems reasonable to expect that such a
condition might actually reduce productive capacity. The production function
approach attempts to take reduced productive capacity into account by
assessing the change in output caused by a disease. The results of such
studies vary considerably. One analysis in southern India estimated that
households whose members suffered with malaria could clear only 40% as much
cropland as those households without malaria,14 suggesting a
considerably greater burden than is indicated by COI analyses. A study
conducted in Cameroon, however, which assessed the impact of parasitemia on rice production, found no significant
effect.15
The Malaria Gap
Macroeconomic analyses indicate that malaria inhibits long-term growth and
development to a degree that previously was unimagined. There are at least
three potential explanations for the magnitude of this effect and for the
discrepancy between these results and those of microeconomic studies. First,
although our hypothesis states that malaria causes poverty, causation runs in
the other direction as well. Many countries are too poor to afford the kinds
of malaria interventions that enabled such wealthier countries as the United
States and Italy to eliminate transmission of this infection from within
their borders. The causal effect of malaria on poverty cannot readily be
isolated from the effect of poverty on malaria. A second econometric problem
lies in the effect of such confounding factors as climate that may drive both
poverty and malaria. A third explanation for the gap lies with a failure of
traditional microeconomic methods to incorporate broad costs of the disease.
The cost-of illness, WTP, and production-function
methods for microeconomic analysis provide a broad range of estimates for the
economic costs of malaria. Leaving aside fundamental data problems, each of
these methods of analysis focus only on certain costs of the illness. The COI
approach may miss costs that are not easily estimated numerically. The WTP approach incorporates household costs exclusively.
The production-function approach makes no attempt to include direct costs of
the disease. There are, moreover, other costs that malaria may impose that
could represent a significant burden at a national level, which would not be
captured by any conventional microeconomic analyses.
The COI methodology evolved in the developed world to evaluate the costs of a
range of illnesses such as circulatory or respiratory diseases. These
diseases tend to affect only a small segment of the population at any point
in time. In much of sub-Saharan Africa, however, malaria represents not
merely an illness, but a pandemic. The ubiquity of malaria in some regions
leads not only to excessive costs for prevention and treatment and a loss of labor, but also to modifications of social and economic behavior that profoundly affect economic growth and
development. Standard measures of direct and indirect costs generally used to
classify the economic burden of disease are simply not designed to capture the
full range of these impacts.
Some of the costs deriving from the ubiquitous nature of malaria are such
that they are external to individual households. In such a situation, the
very existence of malaria in a community imposes a cost on the entire community
by modifying social and economic decisions taken in response to the perceived
risk of infection. It has been widely observed in the descriptive literature
that decision making in such diverse areas as crop choice, trade, investment,
and fertility is affected by the risk of acquiring malaria, with a
potentially sizeable negative effect on economic productivity and growth.
Standard household-based studies naturally fail to capture these effects.
One example of such a cost is the effect that fear of malaria may have on
discouraging foreign trade and investment. International corporations that
seek to extract natural resources may be willing to invest in intensive
anti-malaria measures to protect their workers from infection because the
value of the natural resources that they extract would justify the cost. In
Zambia, for example, such investments by mining corporations greatly
increased in-migration of labor and the output from
copper mines. Indeed, it has been suggested that “effective malaria control was
a principle driving force behind Northern Rhodesian economic development.”16
To encourage investment in the kinds of manufacturing industries that have
formed the basis of growth in many newly industrializing countries, however,
it is necessary to provide an environment that can compete with other such
opportunities. Malariaendemic sites are inimical to
foreign experts and their families. In such a market, investors are less
likely to invest in a region requiring costly health interventions when they
can choose instead to invest in malaria-free zones. In a rapidly globalizing
economy, malaria can prove excessively burdensome in the long run.
Malaria can also affect trade within an economy because visitors to endemic
sites generally lack appropriate immunity, and this may inhibit local traders
from travel within and between malarious regions.
This would limit the development of markets that form the building blocks of
economic growth. Tourism, which can constitute a highly profitable industry,
would similarly be affected by the perception of malaria risk. One approach
to understanding the magnitude of some of these factors is to examine the
impact of malaria control strategies on small island economies. For example,
the emerging oil economies of the West African islands of Sao Tome, Principe,
and Bioko are planning widespread control programs
to control intense endemic malaria that could provide an opportunity to
examine such macroeconomic impacts.
The risk of acquiring malaria can also affect population mobility. Adult
residents of highly endemic sites generally benefit from an acquired
non-sterilizing immunity to the malaria parasite that protects them from the
intense illness that otherwise would result from this infection. Migrants
from non-malarious regions, on the other hand, are
exquisitely vulnerable to infection. Acquired partial immunity, moreover,
dissipates within a few years in the absence of reinfection,
as for example during a period of schooling or a job assignment away from
home. The considerable risk of illness or death upon return may depress the
extent of short-term migration for schooling or temporary job opportunities
in other locations. By limiting the movement of labor
to regions where it is most productive, malaria can interfere with skill-matching
and generally depress worker productivity.
More fundamentally, malaria profoundly affects the demographic structure of a
society. Where this infection is endemic, its mortality burden generally
falls most heavily on children less than five years of age. High rates of
infant and child mortality slow the pace of a country’s demographic
transition, wherein fertility rates decrease in response to a decrease in
mortality. A high fertility/high mortality environment can be especially
detrimental to a nation’s long-term economic growth. In such an environment,
women devote a major part of their productive life to child-rearing
activities. Not only does this exclude them from the workforce, it often
discourages investment in human capital through education of women because
such an investment is less likely to produce economic returns. Such a cost is
particularly inefficient when relatively few of the children a family has
invested in survive to adulthood.
Malaria can also slow the long-term economic growth process through its
impact on the accumulation of human and physical capital. High rates of
saving and investments in physical and human capital have formed the engine
of growth in many of today’s most advanced and rapidly developing economies.
The drain that malaria imposes on family resources through its direct and
indirect costs limits the ability of households to save and to invest in
physical and financial capital. Moreover, malaria tends to reduce the funds
that might be available for education limits the human capital represented by
children.
Human capital accumulation is affected even more directly by malaria through
its effects on school attendance and performance. High rates of school
absenteeism as a result of this disease increase repetition and dropout
rates. An increasing body of research also points toward ways in which
malaria in childhood may permanently affect development and cognitive
performance.17–21 Parasitemic children,
for example, score lower on certain tests than do non-parasitemic
children. The in utero experience of a fetus in a malaria-infected mother may also inhibit the
long term cognitive performance of the resulting child
To the extent that malaria contributes to the burden on societies of other
illnesses, the entire range of direct and indirect costs that result should
be included in the economic calculation. Acute or chronic malaria infection
may alter the immune response to certain other infections while also changing
the response to vaccines. Malaria is causally associated with hyper-reactive splenomegaly, chronic renal damage, the nephrotic syndrome, and Burkitt’s
lymphoma. Malaria suppresses appetite and growth in children and infants.22,23
Acute malaria infection, furthermore, can have chronic health consequences;
cerebral malaria appears to cause long-term neurologic
damage in many of those who survive. Perhaps most tellingly, endemic malaria
has produced such a heavy disease burden through the ages that it has led to
a potentially deadly genetic modification causing sickle cell disease in
approximately 130,000 African infants each year.
A particularly burdensome consequence of chronic malaria is the anemia that directly results from this infection,
particularly in children.24–26 In adults, such anemia
markedly reduces worker productivity.27,28 In children,
malaria-related anemia may be severe and
potentially fatal, frequently requiring blood transfusions. Transfusion
screening systems remain rudimentary in many sub-Saharan African countries,
resulting in the iatrogenic transmission of such blood-borne pathogens as
hepatitis B virus, hepatitis C virus, cytomegalovirus, parvovirus, and
others. An increasingly deadly consequence is the transmission of human
immunodeficiency virus (HIV) through infected blood supplies. Ten to fifteen
percent of overall HIV infections and as much as 25% of pediatric
infections in sub-Saharan Africa result from blood transfusions, mainly for
the treatment of severe malaria and sickle cell anemia.29,30
Recent studies have also shown that malaria infection in pregnant mothers
carrying the HIV virus can increase the rate of transmission to the unborn
child.31 The economic burden of HIV is extremely high, and the
role that malaria plays in increasing risk of infection represents a
particularly costly consequence in both human and economic terms.
Conclusion
Economic estimates of the burden imposed by malaria are essential for guiding
the effective allocation of resources within tightly constrained health or
development budgets. Different methodologic
approaches, however, have produced drastically different results, with
consequent implications for resource allocation. If indeed macroeconomic
estimates of the impact of malaria, which suggest that the disease could
account for a reduction of almost half the annual per capita GDP of some
countries, are correct, then by economic considerations this disease should
receive a much larger share of available resources than is currently devoted
toward this end. Microeconomic estimates, on the other hand, find that the
cost is closer to one percent of per capita GDP, with very different
implications for resource allocation.
An enormous gap separates the various available estimates of the costs
exacted by malaria, with certain research methodologies producing far larger
estimates than do others. A careful examination of each approach suggests
that the malaria gap could, in fact, convey a critical piece of information.
If the studies undertaken using the different approaches successfully answer
the question that they set out to explore, then the difference between these
estimates most likely reflects a difference in the kinds of costs that each
research approach seeks to assess. At the broadest level, this gap suggests
that malaria imposes important economic externalities, i.e., costs that are
borne not by each individual household, but by the community as a whole.
These would include such costs as diminished tourism or foreign direct
investment. Another difference between the questions posed by these
methodologies is the time horizon of the effects. Microeconomic studies focus
on the short-term effect of malaria on households. The magnitude of the
impact of malaria on economic growth found by macroeconomic regressions, in
contrast, suggests that the accumulation of the effects of malaria on
standards of living may be far more serious over the long term. If malaria
affects peoples’ decisions about schooling and their ability to learn or
their decisions to save, this infection could potentially change long-term
income streams in a far more remarkable fashion than is indicated by a case
by case analysis of costs borne by households.
Although macroeconomic analyses of the cost of malaria cannot identify
individual elements in the chain of causation, they do encompass all possible
malaria-related causes of poverty, including any that microeconomic analyses
might miss. The apparent magnitude of the gap that separates these estimates
suggests that certain economic externalities may be vastly more important
than are the direct effects of malaria on public health. Our present
challenge requires that we verify the magnitude of the economic burden of
malaria, understand the channels through which these costs are imposed, and devise
anti-malaria interventions that will most effectively contribute to human betterment in malaria-endemic parts of the world.
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Acknowledgments: We are grateful to Eric R. Weinstein for extensive
discussions and valuable insights. This article also benefited
greatly from the ongoing support and
uncompromising clarity of Dr. Robert W. Snow. Financial support: This work
was carried out under grant #17408 from the Bill and Melinda Gates
Foundation.
Authors’ addresses: Pia Malaney
Center for International Development, John F. Kennedy
School of Government, Harvard University, 79 JFK
Street, Cambridge, MA 02138, Fax: 617-496-8753, E-mail:
Pia_Malaney@harvard.edu. Andrew Spielman,
Department of Immunology and Infectious Diseases, Harvard School of Public
Health, 665 Huntington Avenue, Boston, MA 02115, Fax: 617-432-1796, Jeffrey
Sachs, Earth Institute, Columbia University, New York, NY
10027,.
This paper appeared originally in the Am. J.
Trop. Med. Hyg., 71(Suppl
2), 2004, pp. 141–146.
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SUGGESTED
CITATION:
Pia Malaney, Andrew Spielman,
and Jeffrey Sachs, “The Malaria
Gap”, post-autistic
economics review, issue no. 31, 16 May 2005,
article 1, http://www.btinternet.com/~pae_news/review/issue31.htm
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