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personalia

The Russian Health Crisis and the Economy

Vladimir Kontorovich

Department of Economics, Haverford College
Mailing address: 69 Thoreau Dr., Plainsboro NJ 08536 USA
Tel.: 609-275-9535; Fax: 609-275-7198; e-mail:
 
Abstract
Russia experienced a severe health crisis in the 1990s, as reflected by a drop in life expectancy. It has been suggested in literature that this poor state of health is likely to endure and will significantly retard economic growth in the country. This paper uses evidence from other former Communist countries and studies of income-health relationship across economies to evaluate these claims. It concludes that the mortality increases of 1988-94 and 1999-2000 were the effects, rather than causes, of the economic recession. The state of health is unlikely to put a brake on future economic growth.

Acknowledgements: 
I thank Michael Ellman for his comments on an earlier version of this paper and Luba Kontorovich for editing the text.
 

1. The post-Communist economic divergence

In the late 1980s Russia and its western neighbors had similar socio-economic structures and levels of development [, , ], yet in the 1990s their paths diverged. While some ex-Communist economies experienced rapid growth after the early-1990s contraction, others, including Russia, continued to shrink (Table 1). Explanations for this phenomenon, initially put in terms of differences in macroeconomic policies, have shifted to the quality of political institutions (e. g., corruption and the rule of law), geographic location (Gallup & al., 1999, and Parshev, 2000, pp. 9-104), and Russias imperial legacy (Kontorovich, 1996). Corruption, lawlessness, and imperial institutions and attitudes, while not immutable, are more difficult to change than a wrong fiscal or monetary policy. And there is nothing one can do about a countrys geographic characteristics (though changing technology may modify their economic impact). An analysis of Russias recent lagging performance thus leads to an assessment of its growth prospects. 

[Table 1 here] ( , , )

Almost conterminously with its economic decline Russia experienced an exceptionally severe health crisis, as expected life spans dropped by six years in 1988-94 (Table 2). Other ex-Communist countries had smaller declines in life expectancy, and a few had none (Table 3). [1]  One may hypothesize that Russia's more severe health crisis made its recession deeper than elsewhere. If there is cause to believe that health problems will persist, one may then also expect substandard economic growth in the future. 

[Table 2 here]

Bloom and Malaney (1998, p. 2080) estimated the contribution of the health crisis to the decline in Russian GDP in the 1990s to be very small. Still they speculate that the Russian mortality crisis has the potential to push health below a critical point into a vicious cycle, where declining health leads to a decline in output, which further contributes to declining health. (ibid., p. 2081). Feschbach (1999, p. 27) attributes the high level of mortality and morbidity in Russia in large part to ecological problems, predicts a worsening situation, and states that as a result, long-term solutions to the country's political, economic, and military problems will be inconceivable. 

[Table 3 here] 

Eberstadt (1999, p. 12) agrees that the health crisis will be very difficult to overcome but provides a different reason: the inertia of unfavorable mortality developments in the 1960s-1980s. Eberstadt uses a strong correlation between life expectancy and GDP per capita across countries to forecast Russia's
future GDP. He assumes that the correlation at a moment in time will also hold over decades, so that if Russian life expectancy will improve little, so will its national income (ibid., pp. 16-18).

This paper considers conjectures about the significance of the Russian health crisis for the country's future economic performance. As is common in the literature on health and the economy, I concentrate on only one measurable aspect of health-mortality, as summarized by life expectancy at birth. This makes comparisons over time and across countries easier. By contrast, morbidity data cannot be reduced to one number and are less reliable than those for mortality. It is assumed that mortality and morbidity move together over time and across countries. 
 

2. Why would high mortality in Russia persist? 

For poor health to depress future Russian growth, as Eberstadt (1999) and Feschbach (1999) suggest, the present state of health must persist into the future. In the second half of the 20th century, mortality rates declined in rich, poor, and middle-of-the-road countries on all continents (see, e. g., Easterlin,
2000, pp. 12-13). Some powerful factors unique to Russia must exist for it to be excluded from this universal trend. 
2.1. The environment and a history of stagnant mortality rates 
Feshbach (1999) suggested environmental pollution as one such factor. For it to keep future mortality high, the following should hold: 
a. air, water, and soil in Russia are contaminated more than they are elsewhere; 
b. this has driven Russian mortality rates to their present high level; 
c. the pollutants are long-lived or continuously replenished and are costly to clean up, and therefore will continue to effect health in the coming years.
Whatever the merits of a. and c., point b. is definitely weak. The most important causes of mortality increase of working age population in 1990-94 were accidents, poisonings, traumas, murders, suicides (Table 4). [2] These 'external' causes of death are totally unrelated to environmental pollution. Circulatory diseases - the second largest contributor to mortality increase - are more tenuously associated with health effects of pollution than other possible causes of death.

Together these two groups of causes accounted for three quarters of mortality increase in the early 1990s. Environmental pollution is not the major cause of the present high mortality, as is generally recognized in the literature. [3] Hence there is no reason why, barring a catastrophe, ecological problems should bolster future mortality rates. 

[Table 4 here] 

Eberstadt (1999, p. 14) appeals to history in support of his argument that Russian mortality rates are likely to stagnate in the coming decades. In 1960-90, life expectancy increased in every other part of the world but stagnated in Russia (Table 5). In fact, between the mid-1960s and the late 1970s life expectancy in Russia declined by two years. Whatever forces kept Russia from sharing in the world trend to longer life in the past (and they are far from being understood) may well continue for another couple of decades.

[Table 5 here] 

The problem with this argument is that life expectancy stagnated between 1960 and 1990 in the East European region as a whole, including most Soviet republics in Europe and the Warsaw Pact countries (Table 5). If there is such a thing as inertia of poor health, it should operate not just in Russia but also
throughout the rest of Eastern Europe. Yet Poland, the Czech Republic, and Slovakia have shown rapid improvements in life expectancy in the 1990s, clearly breaking with the stagnation of the previous three decades (Table 3). This shows that a history of stagnation is not sufficient grounds to prevent future growth in life expectancy. 

2.2. Mortality increases in 1988-94 and 1999-2000 
Two recent episodes of increased mortality should be analyzed as potentially signaling a bleak future for health in Russia. In 1988-94, life expectancy for Russian males fell by 7.6 years and for females by 3.4 years (Table 2). Death rates among working age males increased by 50-100% (Table 6). This may be the largest peacetime increase in mortality in the modern age. However, smaller increases in mortality experienced by other countries under similar circumstances help shed light on the Russian developments.

[Table 6 here] 

Mortality increased in most East European countries after the collapse of Communism (Table 3). As in Russia, the increase was more pronounced for men than women. Declines in male life expectancy in the former Soviet republics were 70%-90% of those in Russia. Declines in the ex-CMEA countries were an order of magnitude smaller. Yet small changes in life expectancy may hide substantial changes in death rates for particular age groups. Thus, male life expectancy in Poland declined by 0.39 years from 1990 to 1991, while death rates increased by one third for the 10-14 age group, by 8.5% for the 35-44 age group, and 6.8% for the 45-54 age group (Tables 3 and 7). In Slovenia, the decrease in male life expectancy between 1992 and 1993 was 0.27 years, yet death rates jumped 12% for the 20-24 age group, 21% for the 25-29 age group, and 12.5% for the 40-44 group (Tables 3 and 8). In East Germany the life expectancy decline was also small, but the death rate for men aged 35-45 increased 30% in 1989-91 (Riphahn & Zimmerman, 1998, p. 49; Eberstadt, 1994, pp. 527-8). 

[Table 7 here] 

In 1995-98, male life expectancy in Russia regained 51% of its recent loss (Table 2). Death rates among all age groups declined (Table 6). This is common to all the ex-Communist countries listed in Table 3 except for Belarus. In Slovenia, Poland, and Hungary, where the decline in life expectancy was small and
recovery started early, life expectancy has already exceeded the pre-crisis peak. While Russia experienced the largest decline in life expectancy, it also bottomed out earlier than Ukraine, Belarus, and Lithuania, and had a faster recovery than Estonia and Latvia. As a result, the number of years of life expectancy lost between 1989 and 1998 in Russia was smaller than in the other European ex-republics of the USSR. In 1989, male life expectancy in Russia was lower than in all the other countries in Table 3. In 1997, Russia overtook Ukraine and closed part of the gap with the other ex-republics (Table 9). Still, its lag behind ex-CMEA countries has increased, in some cases rather dramatically.

[Table 8 here] 

The list of countries suffering from the increase in mortality and the timing of this increase leave little doubt that its causes lie in the collapse of the old order. It is not a Russian, but rather post-Communist phenomenon, with former Soviet republics being hit the hardest. The experience of other countries shows that a post-Communist health crisis is reversible and hence likely to be overcome by Russia, as well. 

[Table 9 here] 

This proposition sounds less credible now than it did a few years ago. Before even recovering to its 1992 level, life expectancy in Russia declined again in 1999 (Table 2). The decline continued in 2000, though at slower pace. [4] While the data are not in yet, this second tour of post-Communist mortality increase may well turn out to be an exclusively Russian phenomenon, with at most one or two other former Soviet republics sharing in the misery. [5] Would it then be a manifestation of a fundamental difference in health conditions in Russia and elsewhere that will keep Russia lagging ever farther behind in terms of life expectancy? To answer this question, we need to examine the causes of mortality increase. 
 

3. Relationship between health and income 

3.1. Correlation and causation 
Per capita income and life expectancy correlate strongly with each other across countries at a point in time. [6] Eberstadt (1999, p. 18) uses this fact to deduce the future level of income in Russia from its life expectancy, which is assumed to change little from the present. There are several reasons why this
correlation cannot be used in such a way. 

Health-wealth relationship is the strongest for poor countries with short-lived populations, and then levels off. [7] A logarithmic curve approximates this relationship better than a straight line.[8] Using a straight line instead, as Eberstadt does, exaggerates a slope applicable to Russias level of income. 

The relationship between health and income changes over time. In a sample of more than 100 countries, levels of GDP per capita have been diverging in 1960-1985 while life expectancy levels have been converging (Ingram, 1994, p. 327). The reason for this is that both life expectancy and income depend on many other factors that change over time. [9] Technological change shifts the income life expectancy line upward as time passes (i.e., life expectancy associated with a given level of income today is higher than 30 years ago).[10] Because of the public good property of technology, such improvements need not correlate with income change.

The share of income spent on health services is another factor that can modify income-health relationship. Sri Lanka had a life expectancy at birth of 72 years in 1990, not far below the American 75.4 years, while its GDP per capita was only about 12% of that in the US (IBRD, 1993, pp. 200, 296).[11] Below we will see how the process of urbanization in the 19th century pushed health and income in opposite directions. This means that the straight line which Eberstadt (1999, p. 18) used to describe the current relationship between health and income will not be the same several decades from now, and therefore cannot be used for prediction. 

Correlation between health and income does not tell us anything about the direction of causation. One can construct examples when health determines income, when income determines health, and when both are determined by a third variable. There are microeconomic studies showing that in particular situations one or another of these influences predominates (Smith, 1999, pp. 149-65). But what about an aggregate relationship between health and GDP across countries, the one used by Eberstadt (1999)? 

Pritchett and Summers (1996) studied the relationship between changes in GDP per capita and changes in health for a large sample of developing countries in 1960-85. They used the method of instrumental variables (variables that are closely associated with income, but in their nature can not be influenced by health) to disentangle the interrelation of health and wealth. They found that these variables closely correlate with health, i. e., the main causation link runs from income to health, and not the other way around. These results were obtained for infant mortality, child (under age 5) mortality, and life expectancy at birth. The latter indicator was found to be less sensitive to income than the former two, effect the authors ascribed to poor data quality. Income (or wealth) and health also correlate in a cross section of population within a country (Smith, 1999, pp. 146-7). Ettner (1996) studied the relationship between income and several indicators of morbidity for a cross-section of the US population using instrumental variables method. Her results show that the predominant influence is from income to health. 

The correlation between life expectancy and income cannot be used to predict the latter based on the former, because the causality runs in the opposite direction. 

3.2. Mechanisms of causation 
The post-Communist health crises and the Russian mortality increase of 1999-2000 are examples of income change driving health change. The collapse of the old order in one case and a financial crisis in the other, both unrelated to mortality rates, drove down income, which, in turn, suppressed life expectancy. The collapse of Communism and the 1998 financial crisis here play the role of instrumental variables, enabling us to judge the predominant direction of causality between two parallel processes. The relationship between income and health across countries or in a cross section of population (as discussed in the previous section) works through many channels, some of which are poorly understood. It is common to think that in this relationship, income stands for the degree of physical deprivation and access to health care. This may be an important part of the relationship at low income levels. However, income also correlates with health for a group of equally wellfed white-collar workers using similar medical services (Smith, 1999, p. 158-60). The post-Communist recession must have increased mortality in Russia primarily through channels other than malnutrition or lack of medical care. This is attested to by the data on the most vulnerable age groups - the youngest and the oldest. Mortality rates of infants and children did not increase at all in the 1990s, and that of the elderly increased significantly less than that of working age people (Table 6). The same applies a fortiori to the richer post-Communist countries. The Great Depression in the US had a similar impact on mortality. While GNP declined by 30.5% and bottomed out in 1933, life expectancy declined by 4.8 years in 1934-36 (US, 1960, p. 25 and US, 1975, p. 229). But infant mortality did not increase at all (Table 10). 

[Table 10 here] 

A plausible mechanism for income - health relationship in the early 1990s post-Communist crises was proposed by (Shapiro, 1995, pp. 167-9). [12] Rapid and massive social upheaval induced stress in individuals ill prepared to cope with such change. Stress, in turn, exacerbated circulatory diseases and selfdestructive behavior, such as heavy drinking. Accidents, murders, and suicides are strongly correlated with alcohol consumption. [13] This is consistent with the structure of mortality increase by cause of death discussed above and shown in Table 4. 

Income as a determinant of health works here not as a measure of command over goods and services essential for a healthy life, but as a correlate of personal status, prospects, self-respect, and any number of other hard-to-measure variables. This is also apparently the role of income as determinant of health in a cross section of the population in developed countries (Smith, 1999, p. 162-4). One might equally plausibly argue that the post-Communist health crisis was the result of disintegration of a social order with its roles, values, and other attributes. Income decline may then be taken as a proxy for the depth of social disintegration, providing a continuous measure for an otherwise ethereal category. If large declines in income can, by inducing stress, cause mortality to increase, then the 1999-2000 drop in Russian life expectancy becomes predictable (see Kontorovich, 1998, p. 23). While GDP decline in 1998 was relatively modest 4.6% (Table 1), personal disposable income fell much more. In the fourth quarter of 1998 and the first two quarters of 1999 this variable was about 25% below similar periods in 1997 and 1998 (Goskomstat, 2000, p. 84). It is not Russian mortality that was unusually impervious to improvements, but the economy that was unusually brittle and interrupted the recovery of life expectancy after the 1988-94 plunge. [14] If this analysis is correct, and Russian economy continues its healthy performance of 2000, then life expectancy has to rebound in 2001. 

3.3. Why there is no vicious cycle between growth and health 
Bloom & Malaney (1998, p. 2081) hypothesized that when a decline in income makes people less healthy, poor health may further suppress income. Such a situation is unlikely because, as argued in the previous section, the impact of these two variables on each other is not symmetrical. A large decline in income does indeed hurt people's health and generates a positive feedback. But the latter is small (as Bloom & Malaney themselves have found for Russia). Other factors influencing economic growth easily outweigh the impact of deteriorating health. In the previous section we examined several cases when falling income drove down life expectancy. Let us examine historic episodes when health deteriorated for exogenous reasons and see what this did to growth. What matters in these examples is both the magnitude of the mortality increase and its age composition. Post-Communist health crisis has the maximum possible economic impact because it falls mostly on working age people. A mortality increase that hit mostly children and the elderly would have a much smaller economic effect in the short run. If there are productivity differentials by sex in the economies concerned, then the fact that the post-Communist crisis hits mostly men would also be significant. In the 19th century the most advanced countries experienced prolonged periods of rising mortality, usually attributed to urbanization at a time when cities lacked adequate sanitation. In the US, life expectancy at age ten was falling from about 1790 to 1850. This means that mortality must have been increasing for the working age population. The height of native-born American men, another indicator of the health status of working age people, had been falling from 1830 to 1890. Yet real GDP per capita in the US grew at an average annual rate of 1.2% in 1820-50, 1.5% in 1850-70, and 1.6% in 1870-90 (Fogel & Costa, 1998, p. 57-9 and 61; Maddison, 1995, p. 196). 

In Britain, falling life expectancy in the 1830s and 1840s did not stop economic growth (Table 11). In fact, growth accelerated in the very decade (1840s) when the decline in life expectancy was greatest. [15] It was in urban centers that the growth of the English economy in the mid-19th century was generated, and the cities also suffered the greatest setbacks in health. Szreter and Mooney (1998, pp. 104-105) estimate that life expectancy at birth in English cities with over 100,000 inhabitants declined from 35 years in the 1820s to 29 in the 1830s (a 17% drop), stayed at 30 years through the 1840s, and did not regain its previous peak until well into the 1860s. The relevance of this example is reduced by the fact that I do not know the age distribution of this mortality increase. 

[Table 11 here] 

AIDS epidemic in sub-Saharan Africa, which disproportionately falls on working age population, has so far had little effect on the economic growth of the countries concerned (Bloom & Mahal, 1997; McNeil, 1998). And the jury is still out on the economic impact of the Black Death (Bloom & Malaney, 1998, p. 2074). 

The recent health crises in ex-Communist countries also did not push their economies into a downward spiral. The three Baltic countries, which suffered a mortality crisis comparable in magnitude and in age-sex composition to that of Russia, have been growing since 1995-96 at a respectable, and in the case of Estonia, exceptional rate. Russia itself posted its first significant gain in GDP in ten years in 1999, just as life expectancy declined. GDP growth further accelerated to 7.7% in the first eleven months of 2000, even as mortality kept increasing. 
 

4. Health and growth in Russia 

While the level of mortality in Russia has been unusually high, its changes followed a pattern observed elsewhere. Russian mortality increased between the mid-1960s and the late 1970s, as did mortality in other European Communist countries and European Soviet Republics (for reasons that are not well understood). Mortality in Russia increased again after the collapse of Communism, as it did in most ex-Communist countries. Former Soviet republics suffered deeper declines in life expectancy than the ex-CMEA countries, as did Russia. Russia had the misfortune being a member of all of the afflicted groups, and this goes a long way towards explaining its anomalous, from a global point of view, health record. 

Mortality increase after the collapse appears to be due to stress induced by the social collapse and economic downturn. Change in GDP serves as a convenient proxy for these dislocations. Decline in life expectancy in the early 1990s is strongly correlated with the relative decline in GDP across countries. [16] Former Soviet republics suffered a deep recession and a large increase in mortality, while ex-CMEA countries saw a shallow recession and a much smaller jump in death rates. The severity of the Russian health crisis of the early 1990s was due to the comparatively deep economic recession. 

There are several reasons to believe that causation in these episodes runs from recession to mortality increase and not the other way around. Several studies have found that the relationship between health and income on the macro level is asymmetric, with the stronger impact being the latter on the former. Economic decline was caused by events (collapse of the Communist system) that are clearly independent from change in mortality. There have been other instances when an economic downturn caused by non-health related events led to increased mortality, such as the Great Depression in the US and the Russian financial crisis of 1998. 

The sorry experience of the past does not predetermine continued stagnation of life expectancy in Russia. Some of the countries with similar health crises experiences overcame their post-Communist mortality increase and have shown sustained improvements in life expectancy. Others appear well on the way to doing so. Absent new severe economic shocks, life expectancy shows the tendency to recover to pre-crisis levels. And as the economy embarks on sustained growth, mortality is likely to start declining, as it is everywhere else in the world. Yet even if this does not happen and mortality in Russia stagnates, this will not stymie economic growth. 
 

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