Interrelationships between Health, Environment Quality and Economic Activity: What Consequences for Economic Convergence

This paper examines the link between health indicators, environmental variables and economic development, and the consequences of this relationship on economic convergence for a large sample of rich and poor countries. While in economic literature income and environment are seen to have an inverted-U shaped relationship (Environment Kuznets Curve hypothesis), it is also well established that an improvement in environmental quality is positively related to health. Our study focuses on the implications of this relationship for economic convergence. In the early stage of economic development, the gain from income growth could be cancelled or mitigated by environmental degradation through populations’ health (and other channels) and create a vicious circle in economic activity unlike in developed countries. This in turn could slow down economic convergence. To empirically assess these issues, we proceeded to an econometric analysis through three equations: a growth equation, a health equation and an environment equation. We found that environmental degradation affects negatively economic activity and reduces the ability of poor countries to reach developed ones economically. We also found that health is a channel through which environment impacts economic growth. This shows that environmental quality could be considered as a constraint for economic convergence.