Health Economics in Developing Countries

This article reviews the ways in which neoclassical economics is applied to health issues in developing countries. It identifies some of the problems that arise from the application of standard neoclassical theory to the health sector of developing countries. This theory, while helpful in some respects, does not seem to be adequate for understanding the complexities of the health issues facing the less developed countries. The article discusses the ways by which investment in health can accelerate the economic development of developing countries, and stresses the role of nutrition and education in strengthening the health profiles of developing countries. The various methods of resource allocation are reviewed, and their implications for the health care sector of developing countries are analyzed. The article takes a cursory look at the AIDS epidemic in less developed countries, identifying some of the reasons for the explosion of the disease in developing countries. The implications of relying on the market mechanism for resource allocation in developing countries are also explored.