The Efficiency-Return Paradox A Causal Estimate of the Health-Growth Elasticity and the Case for Efficiency-Linked Financing

The causal effect of health on economic growth is central to development policy yet plagued by endogeneity, and by using System GMM validated by a strong external instrument, a definitive Health-Adjusted Growth Elasticity (HAGE) was estimated for 92 countries (1995–2024): A 1% increase in life expectancy raises GDP per capita by 0.258%, correcting a 37% upward bias in conventional estimates. Crucially, the study identifies an Efficiency-Return Paradox: a strong negative correlation (−0.54) between this causal return and national health system efficiency (HAFE), trapping the greatest growth potential in the least efficient systems. Furthermore, the study proposes a paradigm shift: conditioning development finance on verifiable efficiency gains to maximize economic and human returns.