Improving health in an advanced economy: An economywide analysis for Australia

We project the economy wide effects of changes in the health of the Australian workforce associated with a reduction in chronic disease prevalence. Our analysis is based on a dynamic, computable general equilibrium model that incorporates a detailed representation of demographic and health trends of the Australian labour force. Our results show that health improvements for older workers have a much greater effect than similar improvements for younger workers, due to the sensitivity of workforce participation to health for older workers relative to younger workers. We observe an expansion in GDP, employment and capital from the health improvements, but a fall in the capital-labour ratio. Traded sectors benefit much more than nontraded sectors with a consequent improvement in the trade balance and an associated real depreciation of the exchange rate.