In this paper we investigate the causal effect of life expectancy on economic growth by explicitly accounting for the role of the demographic transition. In addition to focusing on issues of empirical identification, this paper emphasizes the role of the econometric specification. We present a simple theory of the economic and demographic transition where individuals' education and fertility decisions depend on their life expectancy. The theory predicts that before the demographic transition improvements in life expectancy primarily increase population. Improvements in life expectancy do, however, reduce population growth and foster human capital accumulation after the onset of the demographic transition. This implies that the effect of life expectancy on population, human capital and income per capita is not the same before and after the demographic transition. Moreover, a sufficiently high life expectancy is ultimately the trigger of the transition to sustained income growth. We provide evidence supporting these predictions using data on exogenous mortality reductions in the context of the epidemiological revolution.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
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Quamrul H. Ashraf & Ashley Lester & David N. Weil, 2008.
"When Does Improving Health Raise GDP?,"
NBER Chapters,
in: NBER Macroeconomics Annual 2008
National Bureau of Economic Research, Inc.
[Downloadable!]
Peter Lorentzen & John McMillan & Romain Wacziarg, 2008.
"Death and development,"
Journal of Economic Growth,
Springer, vol. 13(2), pages 81-124, June.
[Downloadable!] (restricted)
Other versions:
Lorentzen, Peter L. & McMillan, John & Wacziarg, Romain, 2005.
"Death and Development,"
CEPR Discussion Papers
5246, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Peter Lorentzen & John McMillan & Romain Wacziarg, 2005.
"Death and Development,"
NBER Working Papers
11620, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)