Macroeconomic consequences of the Russian mortality crisis

This paper examines macroeconomic consequences of the Russian mortality crisis. Life expectancy in Russia decreased from 70 to 65 years during the first half of the 1990s, which we estimate accounts for approximately 1.6 million excess deaths during 1990-95. Coupled with its disproportionate impact on working age males, the large number of excess deaths suggests the crisis may have had a significant negative impact on the level and growth of Russia's per capita income, We estimate the economic cost of the crisis using two alternative approaches. First, we estimate the capitalized value of the income forgone due to the crisis, which represents between 1.8 and 2.7% of Russia's 1990 GDP.. There are, however, both theoretical and empirical problems with this approach to estimating the cost of the crisis. Second, we estimate the parameters of a macroeconomic growth model and use it to calculate the effect of the crisis on Russia's rate of economic growth. Our calculations suggest that the net effect of the drop in life expectancy, the decline in the rate of total population growth, and the even larger decline in the rate of growth of the working age population have been to lower the annual rare of growth of income per capita in Russia by roughly one-third of one percentage point. Given that Russia's per capita income fell at an average annual rate of 9% during 1990-95, we conclude that the mortality crisis - which has unquestionably been catastrophic in human terms - has been at most a small contributor to Russia's poor macroeconomic performance. The paper also discusses the effects of the crisis on other macroeconomic variables such as income inequality and the fiscal balance of the pension system. The paper concludes with a discussion of possible new approaches to modeling the two-way linkages between health status and economic growth. (C) 1998 Published by Elsevier Science Ltd. All rights reserved.