Adjusting National Accounting for Health: Is the Business Cycle Countercyclical?

32 Pages Posted: 18 May 2013 Last revised: 2 Oct 2013

See all articles by Mark Egan

Mark Egan

Harvard University - Business School (HBS); National Bureau of Economic Research (NBER)

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

Tomas Philipson

University of Chicago; National Bureau of Economic Research (NBER)

Date Written: May 2013

Abstract

Many national accounts of economic output and prosperity, such as gross domestic product (GDP) or net domestic product (NDP), offer an incomplete picture by ignoring, for example, the value of leisure, home production, and the value of health. Previous discussed shortcomings of such accounts have focused on how unobserved dimensions affect GDP levels but not their cyclicality, which affects the measurement of the business cycle. This paper proposes a new methodology to measure economic fluctuations that incorporates monetized changes in health of the population in the United States and globally during the past 50 years. In particular, we incorporate in GDP the dollar value of mortality, treating it as depreciation in human capital analogous to how net domestic product (NDP) treats depreciation of physical capital. Because mortality tends to be pro‚Äźcyclical, we find that adjusting for mortality reduces the measured deviations of GDP from trend during the past 50 years by about 30% both in the United States and internationally.

Suggested Citation

Egan, Mark and Mulligan, Casey B. and Philipson, Tomas J., Adjusting National Accounting for Health: Is the Business Cycle Countercyclical? (May 2013). NBER Working Paper No. w19058. Available at SSRN: https://ssrn.com/abstract=2266804

Mark Egan (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Baker Library 365
Boston, MA 02163
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National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Casey B. Mulligan

University of Chicago ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-9017 (Phone)
773-702-8490 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Tomas J. Philipson

University of Chicago ( email )

Graduate School of Business
1101 East 58th Street
Chicago, 60637

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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