Economic Implications of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union Edited by Cem Mete Economic Implications of Chronic Illness and Disability Disability is an important issue for the transition countries of Eastern Europe and the former Soviet Union. Not only is a significant portion of their population either in poor health or disabled—with implications for labor force participation and productivity—but their aging demo- graphics project an increase in the share of disabled people, raising concerns about the sustainability of social protection programs. Thus, if these heavily resource-strapped countries fail to deal in an efficient manner with disability and health issues in their population, they could face serious challenges to their efforts to achieve stronger economic growth and improved living standards. Because the economic drivers and costs of poor health status and disabilities in this region are not well documented, Economic Implica- tions of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union aims to close this gap by leveraging household survey data from a large number of transition countries, analyzing the poverty- disability relationship and the linkages between disability and employ- ment, earnings, children’s school enrollments, and adults’ time-use patterns. Altogether, disability appears to have stronger negative effects on the economic and social well-being of the population in these countries as compared with industrialized countries. The main reasons are the prevalence of a large informal sector, the relatively weak targeting performance of the existing social assistance programs, and the lack of broad-based insurance mechanisms to protect individuals against loss of income due to unexpected illnesses. Addressing these weaknesses is the challenge facing policy makers and the population at large in the region, through the definition and enactment of a deep, well-coordinated, cross-sectoral reform agenda. This book will be useful for policy makers and development officials working to improve living standards in the Eastern Europe and the former Soviet Union. The World Bank ISBN 978-0-8213-7337-8 SKU 17337 This study is part of a series undertaken by the Europe and Central Asia region of the World Bank. The series draws on original data, the World Bank’s operational experience, and the extensive literature on the Region. Poverty, jobs, trade, migration, energy, and productivity will be among the topics covered. This report is part of a series undertaken by the Europe and Central Asia Region of the World Bank. The series covers the following countries: Albania Armenia Azerbaijan Belarus Bosnia and Herzegovina Bulgaria Croatia Czech Republic Estonia FYR Macedonia Georgia Hungary Kazakhstan Kyrgyz Republic Latvia Lithuania Moldova Montenegro Poland Romania Russian Federation Serbia Slovak Republic Slovenia Tajikistan Turkey Turkmenistan Ukraine Uzbekistan ECONOMIC IMPLICATIONS OF CHRONIC ILLNESS AND DISABILITY IN EASTERN EUROPE AND THE FORMER SOVIET UNION ECONOMIC IMPLICATIONS OF CHRONIC ILLNESS AND DISABILITY IN EASTERN EUROPE AND THE FORMER SOVIET UNION Edited by Cem Mete 2008 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. 1 2 3 4 11 10 09 08 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and / or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete informa- tion to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA: telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. ISBN-10: 0-8213-7337-4 ISBN-13: 978-0-8213-7337-8 e-ISBN-10: 0-8213-7338-2 e-ISBN-13: 978-0-8213-7338-5 DOI: 10.1596/978-0-8213-7337-8 Library of Congress Cataloging-in-Publication data has been requested. The Report Team and Acknowledgments xi Key Findings and Future Research Directions xiii PART I A REGIONAL OVERVIEW 1 1. Introduction 3 Cem Mete with Jeanine Braithwaite and Pia Helene Schneider Regional Context 4 Different Definitions, Different Prevalence Rates 5 Main Causes of Disability in the Region 9 Employment and Disability 9 Heterogeneity among the Disabled 12 Earnings Disadvantage of the Disabled Is Larger in Transition Countries 12 Poverty and Disability 14 Does Employment Protect the Disabled from being Poor? 16 Health Shocks, Employment, and Poverty 17 Social Protection Transfers and the Disabled 17 Disabled Children’s Limited Opportunities to Build Human Capital 19 Other Nonmonetary Costs of Disability: Caring for the Disabled 22 Appendix I: Disability-Related Questions in Available Household Survey Data 25 Appendix II: Basic Information on Time-Use Surveys 28 Appendix III: Proxies for Disability and Chronic Conditions Used in the Remaining Chapters 29 Notes 30 Contents v vi Contents PART II COUNTRY STUDIES 33 2. Measurement of Disability and Linkages with Welfare, Employment, and Schooling 35 Kinnon Scott and Cem Mete Introduction 35 Measuring Disability 36 Incidence of Limited Physical Functioning and Health 41 To What Extent are Disabled Individuals Poor, Less Educated, and Out of the Labor Force? 48 Conclusion 56 Appendix I: Health, Disability, and Physical Functioning Questions in URPS, Waves 1, 2, and 3 58 Notes 65 References 65 3. The Impact of Health Shocks on Employment, Earnings, and Household Consumption in Bosnia and Herzegovina 67 Cem Mete, Huan Ni, and Kinnon Scott Introduction 67 Bosnia and Herzegovina Context 68 Data 70 Empirical Framework 70 Results 72 Conclusions 80 Notes 81 References 82 4. Health Disabilities and Labor Productivity in Russia in 2004 85 T. Paul Schultz Introduction 85 Institutional Change and Uncertainties of the Transition: Mental Disabilities 87 Descriptive Statistics of the Russian Survey Population 89 A Conceptual Framework to Guide the Econometric Analysis 98 Empirical Findings 100 Conclusions 108 Appendix 110 Notes 114 References 116 Contents vii 5. The Implications of Poor Health Status on Employment in Romania 119 Cem Mete and Shirley H. Liu Introduction 119 The Context: Romania in Transition 121 Data and Descriptive Trends 122 Results 123 Conclusions 129 Appendix 131 Notes 135 References 135 Box Chapter 1 1.1 Defining Disability 6 Figures Chapter 1 1 WHO Definition of Disability 7 2 Various Definitions of Disability Incidence in Uzbekistan 7 3 Prevalence of Disability by Age Group 8 4 Prevalence of Chronic Illness by Age Group 8 5 Probability of being an Employee/Wage Employee 10 6 Employment Rates of Disabled and Nondisabled Individuals 11 7 Educational Attainment and Employment of Those with Congenital Disability Versus Other Disability 13 8 Disabled and Chronically Ill Wage Employees Earn Less 13 9 Relationship between Household Wealth and Disability at Various Life Stages 14 10 Disability Rates by Consumption-Based Poverty Status 15 11 Disability Rates by Asset-Based Poverty Status 16 12 Percentage of Disabled and Nondisabled Individuals in the Poorest Quintile of the Consumption Distribution 16 13 Persons Receiving Disability Benefits per 100,000, in 2003 18 14 Distribution of Disability Pension Beneficiaries by Household Consumption 19 15 Distribution of Disability Pension Beneficiaries by Household Consumption 20 16 Enrollment Rates of 16- to 18-Year-Olds 21 17 Percentage of Individuals Spending Time Assisting Family Adult, and Time Spent 23 18 Who Takes Care of Disabled Household Members? 24 viii Contents Chapter 2 1 Incidence of Disability Using Various Definitions in Uzbekistan 37 Chapter 4 1 Economic Activity of Russian Population, 2004 90 2 Proportion of Russian Population with a Pension, 2004 91 Chapter 5 1 Quality of Water and Public Health Services in 21 Transition Countries 120 2 Quality of Water and Public Health Services in 21 Transition Countries 121 Tables Chapter 2 1 Indicators of Physical Functioning 38 2 Characteristics of the Panel and Full Samples 41 3 Incidence of No and Full Limitations by Domain of Physical Functioning 42 4 Correlation of Scores for Domains of Physical Functioning 43 5 Disability and Physical Functioning 44 6 Alternative Measures of Disability and Physical Functioning 45 7 Correlations of Alternative Measures of Disability to Official Disability Status 46 8 Probability of Having Official Disability Status 47 9 Consumption and Disability: Log of per Capita Consumption Is the Dependent Variable, OLS Coefficients, and Standard Errors 49 10 Gross Enrollment Rates by Economic Region in Uzbekistan. 2002 to 2003 50 11 Probability of School Enrollment: Children Age 7–14 51 12 Probability of School Enrollment, Ages 15–18 52 13 Years of Schooling Obtained 54 14 Probability of Being Economically Active 55 Chapter 3 1 Correlation among Indicators of Health and Disability 72 2 Household Heads: Sample Statistics, Means, and Standard Deviations 73 3 The Effect of a Change in Household Head’s Health on His or Her Hours Worked 74 4 Effect of a Change in Household Head’s Health on Labor Supply and Earnings 75 5 Comparison of Household Situations before and after Health Shocks 76 6 Effect of a Change in Household Head’s Health on Per-Capita Household Consumption 77 7 Marginal Effects of Changes in Household Heads’ Health on their Children’s Schooling 78 8 Effects of Decomposed Changes in Household Head’s Health on Change in His or Her Hours Worked 79 Chapter 4 1 Russian Longitudinal Monitoring Survey for 2004: Labor Market [...]... segment of the population is employed in the informal sector (making it difficult to collect insurance premiums from them) 00 -Disability- FM.qxd xvi 1/25/08 8:59 AM Page xvi Economic Implications of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union Another example is the finding that in Bosnia and Herzegovina, after the onset of the disability, the decline in the number of hours... Illness and Disability in Eastern Europe and the Former Soviet Union standing of the reasons why various indicators produce the trends that they do, one can improve the way we identify the most vulnerable groups in the population The cross-country evidence confirms the sharp age gradient in the reporting of health ailments, especially for the reporting of chronic illnesses (figures 3 and 4) An interesting... At the beginning of the project, a critical issue that the team sought guidance on was how to sharpen the focus of the proposed work, since very few (quantitative) papers have xi 00 -Disability- FM.qxd xii 1/25/08 8:59 AM Page xii Economic Implications of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union been written on the broader topic of the economics of disability using... insights into our understanding of the challenges involved in defining and measuring disabilities Pia Helene Schneider also contributed to the overview chapter, focusing on the main causes of disability in the Eastern Europe and Central Asian countries, and policy implications of the observed trends Lucian Pop provided useful advice on the nature of social protection programs and data sets in the region,... Implications of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union and from formal and informal employment (in addition to dropping out of the labor force) determine whether the disabled will benefit from an economic boom.22 Heterogeneity among the Disabled It is useful to recognize the heterogeneity among the disabled population in this context, both because the diverging trends in. .. steeply by age with implications for employment and productivity, as discussed next xiii 00 -Disability- FM.qxd xiv 1/25/08 8:59 AM Page xiv Economic Implications of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union Linkages with Employment, Earnings, and Poverty The linkages between disability and economic and social outcomes of interest tend to be stronger in transition countries... 1/23/08 1:32 PM Page 4 Economic Implications of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union age of 9 percent in 2003, even though employment levels in many transition countries remain below the EU-15 average of 65 percent.1 Failing to deal with disability issues or dealing with them in an inefficient manner can be very costly—especially for the rapidly aging transition countries... to the onset of a new chronic disease At the individual level, considering the evidence that the employment consequences of being disabled worsen over time, there is a need to examine both the duration of disability compensation, as well as the capacity (in terms of skills) and incentives for the individual to reenter the labor force Nonmonetary Costs of Disability and Chronic Illness There are significant... tackle in the future The excluded topics include the social integration of disabled individuals, the status and shortcomings of institutionalized care in the region, alternative home care and community care models, transport and infrastructure, detailed sectoral perspectives,3 discrimination,4 and cost-benefit analysis of prevention against certain types of disability. 5 Regional Context Under the Soviet/ Yugoslav... 6 Economic Implications of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union BOX 1.1 Defining Disability Disability is an umbrella term that can refer to quite different health ailments, depending on the context Alternative approaches to measuring disability include diagnosis-based assessments (e.g., “Does anyone in this household have epilepsy?”); Activities of Daily Living . Republic Slovenia Tajikistan Turkey Turkmenistan Ukraine Uzbekistan ECONOMIC IMPLICATIONS OF CHRONIC ILLNESS AND DISABILITY IN EASTERN EUROPE AND THE FORMER SOVIET UNION ECONOMIC IMPLICATIONS OF CHRONIC ILLNESS AND DISABILITY IN EASTERN EUROPE. Chronic Illness and Disability in Eastern Europe and the Former Soviet Union Another example is the finding that in Bosnia and Herzegovina, after the onset of the disabil- ity, the decline in the. Economic Implications of Chronic Illness and Disability in Eastern Europe and the Former Soviet Union Edited by Cem Mete Economic Implications of Chronic Illness and Disability Disability