Academic
Publications
The Macroeconomic Impact of Chronic Disease in the United Kingdom
with Andrew Scott (LBS) - Journal of the Economics of Ageing
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Presented at:
LBS Health and Growth Workshop, ROCKWOOL Berlin
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Abstract:
This paper examines the macroeconomic impact of chronic disease in the United Kingdom (UK). We use individual-level data to estimate how diagnoses of six major diseases affect labor market transitions and combine these with a tractable growth model with age-specific productivity and labor force participation to quantify the impact of chronic disease on UK economic growth. Using a novel machine learning approach to classify National Health Service (NHS) cost data, we also provide new estimates of disease-specific treatment costs. Our findings indicate that a 20% reduction in disease incidence would increase annual GDP by 0.99% after five years and 1.51% after ten years. Most of the gains are due to increased participation in the labor force, especially among workers aged 50 to 65 years. Reductions in mental health conditions and musculoskeletal conditions contribute the most to these effects. Our analysis points to three important features of preventative health policies: 1) the potential welfare gains are substantial and manifest themselves in terms of both improved population health and increased output growth, 2) only around 40% of long-term effects appear after five years, and 3) the 50-65 age group experiences the largest labor force participation gains. This last feature is due to two factors: improved health at those ages prevents transitions into health-related inactivity and a larger share of workers reaches this age band as a result of reduced transitions into inactivity at earlier ages. This compounding effect underscores the importance of targeting prevention efforts at earlier ages.
Work in progress
Bad Bank, Bad Luck? Evidence from 1 Million Firm-Bank Relationships
with Peter Lambert (LSE)
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Presented at:
Stockholm School of Economics, Federal Reserve Bank of Boston, FDIC, BSE Summer Forum, LBS Transatlantic Doctoral Conference, University of Oregon Summer Finance, EEA Congress, FDIC/Fed Community Banking Research Conference, EUROFIDAI Paris December Meeting
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Abstract:
This paper studies the effects of bank failure on firm performance. We collect 36 million loan records to build a novel dataset on the credit relationships of 1.8 million US firms, predominantly composed of small and medium-sized enterprises (SMEs). We then implement a staggered treatment difference-in-differences estimation strategy using 179 bank failures from 1990 to 2023 to estimate the impact of bank failure on firm-level survival and employment growth. Although the US regulatory framework resolves failed banks through forced acquisitions by healthier institutions—a process designed to minimize disruption—we find substantial negative effects. Firms with a credit relationship to a bank that subsequently fails are 6.7 percentage points (44.3%) more likely to fail themselves within five years, while surviving firms exhibit 25% lower employment growth compared to those banking with non-failed institutions. These impacts persist for more than 10 years, are evident during both crisis and non-crisis periods, and are strongest among very small firms—a firm size segment that we are the first to study in this context. Our estimated effects are further supported by two natural experiments. Surprisingly, we also observe that a small subset of bank failures had positive effects on firm outcomes, suggesting that, in some cases, bank failure can be fortuitous for affected firms. Overall, our findings suggest that bank failures exert a substantially larger influence on the real economy than previously recognized, possibly requiring a re-evaluation of current regulatory approaches to managing such events.
with Peter Lambert (LSE)
Machinery of Progress: Charting the Capabilities of Capital Equipment, 1993-2023
In this paper we chart the technological progress embodied in capital equipment, and the innovation and diffusion patterns therein. To do this, we digitize archival administrative filings from 1998 to 2024 and extract 50 million capital equipment transactions from five large US States. From these documents, we deploy an `agentic AI' measurement approach, where multiple AI `agents' collaborate to build and validate the data. The final dataset contains the make and model millions of pieces of IT equipment, heavy machinery, agricultural tools, vehicles, robotics, CNC machines, and much more. It also contains equipment-level characteristics, including time varying prices. We use these data to document five facts: First, new capital equipment with substantial productivity-enhancing capabilities takes years or decades to diffuse. Second, capital which is labor-replacing depressing both hiring and wages of lower-skilled workers. Third, equipment which is labor-augmenting drives hiring growth and raises wages for higher-skilled workers. Fourth, the skill-mix of labor is heavily influenced by new capital equipment adoption.
The Economic Value of Prevention over the Life‑Cycle
This paper quantifies how individuals value preventive health interventions in the presence of multiple lifecycle risks. I develop a continuous-time heterogenous agent model in which agents make consumption-saving and labor supply decisions while facing age-dependent productivity, stochastic income shocks, mortality risk, and an absorbing sickness state that permanently reduces labor productivity. Using this framework, I compute willingness-to-pay (WTP) for prevention—defined as policies reducing sickness arrival rates—across the entire state space. My analysis reveals striking heterogeneity: WTP is significantly lower for individuals facing high income uncertainty, as precautionary saving motives crowd out health investment. The value of prevention peaks not among the wealthy but for "asset-poor, productivity-rich" agents in their 50s, for whom sickness destroys their primary insurance mechanism—labor supply flexibility. Models ignoring endogenous labor underestimate WTP by over 50% for this demographic. I also document an inverted U-shaped lifecycle profile for prevention value, peaking in late 50s when sickness risk becomes salient while productive years remain. These findings highlight how the interaction between market and non-market risks fundamentally shapes health investment decisions.
Policy
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Co-authors: Professor Sir John Bell (Ellison Institute of Technology), Tamsin Berry (Ellison Institute of Technology), Professor John Deanfield (UCL), Dr Ines Hassan (Tony Blair Institute), Dr Roshni Joshi (Tony Blair Institute), Professor Andrew Scott (LBS)​
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​Abstract:
In this report, we argue for a shift towards preventative healthcare measures to address the economic challenges posed by an aging population and increasing disease burden. Using our novel model that combines health interventions with macroeconomic indicators, we estimate that a 20% reduction in six major disease categories could boost annual GDP by £26.3 billion within ten years and generate significant fiscal savings. We highlight the potential of treatments targeting multiple conditions, such as GLP-1 RA drugs, to unlock even greater economic benefits. Our case study on cardiovascular disease interventions demonstrates that even targeted treatments can yield substantial long-term economic gains. We emphasize the need for swift implementation of prevention programs and suggest starting with cardiovascular disease-focused initiatives due to available cost-effective interventions. We conclude that prioritizing preventative health measures can create a virtuous cycle of improved health, economic growth, and sustainable healthcare budgets.
Press coverage: The Guardian, Video summary by Sir Tony Blair, Op-Ed by Indonesian Health Minister