CoPS/IMPACT Working Paper Number G-231

Title: The Impact of Changes in Health Status: An Economywide Analysis for Australia

Authors: George Verikios, Peter B. Dixon, Maureen T. Rimmer and Anthony H. Harris


We construct a dynamic, computable general equilibrium model of the Australian economy that incorporates a detailed representation of demographic and health trends of the labour force. We project the economywide effects of changes in the health status of the workforce associated with a change in chronic disease prevalence. Our results show that reductions in chronic disease and the associated rate of health decline of older workers have a much greater effect than similar reductions for younger workers. Traded sectors benefit much more than nontraded sectors, with a consequent improvement in the trade balance and a real depreciation of the exchange rate. The increase in workforce participation also decreases the capital-labour ratio and raises the returns to capital relative to labour.

JEL classification: C68, I15, J11.

Keywords: chronic disease, computable general equilibrium, health status, labour supply.

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