Answer to Question 1
Health is a form of human capital that affects learning capacity and worker productivity. However, the presence of diseases like malaria and hookworm infection in underdeveloped and developing countries is unlikely to explain the very large differences in per capita income and productivity that we observe today for several reasons:
The impact of poor health on productivity, obtained in microeconomics studies, is too small to account for the enormous differences in income per capita we observe between rich and poor countries today.
Causation can move in either direction; poor health conditions in parts of the world today are as much a consequence of poverty as a cause. Low life expectancy, infectious diseases, and poor health conditions in eighteenth-century England did not prevent English cities from becoming engines of economic growth.
Studies that look at the macroeconomic effects of large health improvements do not find evidence for supporting the premise that even very successful health interventions will create much faster economic growth (even though they will save millions of lives and are thus extremely valuablesocially).
A-head: ECONOMICS OF HEALTH
Concept: Health and productivity
Answer to Question 2
If a firm is earning positive economic profit, it is earning more than a normal rate of return. This will attract new firms into the industry.
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