A Review of Disease and Development

TL;DR

This paper critically reviews Acemoglu and Johnson's 2007 study, replicates their analysis, identifies biases and violations in their instrumental variable approach, and questions their conclusion that health improvements do not significantly impact income growth.

Contribution

It replicates and refines previous research, highlighting biases and methodological flaws in the instrumental variable construction used to assess health's effect on income growth.

Findings

Identified biases in the original estimate

Found violations of instrumental variable assumptions

Questioned the causal link between health and income growth

Abstract

Acemoglu and Johnson (2007) put forward the unprecedented view that health improvement has no significant effect on income growth. To arrive at this conclusion, they constructed predicted mortality as an instrumental variable based on the WHO international disease interventions to analyse this problem. I replicate the process of their research and eliminate some biases in their estimate. In addition, and more importantly, we argue that the construction of their instrumental variable contains a violation of the exclusion restriction of their instrumental variable. This negative correlation between health improvement and income growth still lacks an accurate causal explanation, according to which the instrumental variable they constructed increases reverse causality bias instead of eliminating it.