Malaria and National Income: Examining a Two Way Causal Relationship

Simple plots of data show that malaria has a negative correlation with national income per capita, whether looking across countries at a point in time, or looking at a single country over time. Some countries have been able to move from an equilibrium characterized by low income and high malaria, to a new equilibrium with higher income and lower rates of malaria. This study develops and estimates a simultaneous equations model to explain these changes. We distinguish three potential causal chains: (a) the ability for decreases in malaria to increase income, (b) the ability for increases in income to reduce malaria (reverse causality), and (c) external factors that may lead to both higher income and lower malaria (incidental association). We find that changes in income have a much stronger effect on malaria than the other way around. While a 1% rise in the number of malaria cases per million decreases income per capita by less than 0.01%, a 1% rise in income per capita decreases the number of malaria cases per million by more than 1.1%. If income were just 1% higher in the 100 countries of the sample, 603,189 cases of malaria could be averted annually.