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The Relationship Between Health and Growth: When Lucas Meets Nelson-Phelps

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  • Philippe Aghion
  • Peter Howitt
  • Fabrice Murtin

Abstract

This paper revisits the relationship between health and growth in light of modern endogenous growth theory. We propose a unified framework that encompasses the growth effects of both the rate of improvement of health and the level of health. Based on cross-country regressions over the period 1960-2000, where we instrument for both variables, we find that a higher initial level and a higher rate of improvement in life expectancy both have a significantly positive impact on per capita GDP growth. Then, restricting attention to OECD countries, we find supportive evidence that only the reduction in mortality below age forty generates productivity gains, which in turn may explain why the positive correlation between health and growth in cross-OECD country regressions appears to have weakened since 1960.

Suggested Citation

  • Philippe Aghion & Peter Howitt & Fabrice Murtin, 2011. "The Relationship Between Health and Growth: When Lucas Meets Nelson-Phelps," Review of Economics and Institutions, Università di Perugia, vol. 2(1).
    • Handle: RePEc:pia:review:v:2:y:2011:i:1:n:1
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    Keywords

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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • I10 - Health, Education, and Welfare - - Health - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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