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Growth and Welfare under Endogenous Lifetime

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Abstract

We develop a perpetual youth model to investigate how longevity affects economic growth and welfare. Life expectancy is determined by individuals’ investments in healthcare. We find that improvements in the healthcare technology always increase the steady state growth rate. Although the effect is small, even for large increases in longevity, welfare gains may be substantial depending on the type of the technological improvement. We identify two externalities associated with healthcare investments and provide a condition when healthcare expenditures are inefficiently low in the market equilibrium. Finally, we discuss our results with respect to alternative spillover specifications in the production sector.

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  • Maik T. Schneider & Ralph Winkler, 2010. "Growth and Welfare under Endogenous Lifetime," CER-ETH Economics working paper series 10/137, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:10-137
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    Cited by:

    1. Kuhn, Michael & Prettner, Klaus, 2016. "Growth and welfare effects of health care in knowledge-based economies," Journal of Health Economics, Elsevier, vol. 46(C), pages 100-119.
    2. Kelly, Mark, 2020. "Medicare for all or medicare for none? A macroeconomic analysis of healthcare reform," Journal of Macroeconomics, Elsevier, vol. 63(C).
    3. Torben M. Andersen & Joydeep Bhattacharya, 2014. "A dynamic-efficiency rationale for public investment in the health of the young," Canadian Journal of Economics, Canadian Economics Association, vol. 47(3), pages 697-719, August.
    4. Kuhn, Michael & Frankovic, Ivan & Wrzaczek, Stefan, 2017. "Medical Progress, Demand for Health Care, and Economic Performance," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168249, Verein für Socialpolitik / German Economic Association.
    5. Annarita Baldanzi & Klaus Prettner & Paul Tscheuschner, 2019. "Longevity-induced vertical innovation and the tradeoff between life and growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(4), pages 1293-1313, October.
    6. Pintu Parui & Klaus Prettner, 2024. "Public provision of healthcare and basic science: What are the effects on economic growth and welfare?," Department of Economics Working Papers wuwp365, Vienna University of Economics and Business, Department of Economics.
    7. Fehr, Hans & Feldman, Maria, 2024. "Financing universal health care: Premiums or payroll taxes?," European Economic Review, Elsevier, vol. 166(C).
    8. Ivan Frankovic & Michael Kuhn & Stefan Wrzaczek, 2016. "Medical Care within an OLG Economy with Realistic Demography," VID Working Papers 1603, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
    9. Bloom, David E. & Kuhn, Michael & Prettner, Klaus, 2018. "Health and Economic Growth," IZA Discussion Papers 11939, Institute of Labor Economics (IZA).
    10. Klaus Prettner, 2013. "Population aging and endogenous economic growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 811-834, April.
    11. Belyakov, A.O. & Kurbatskiy, A.N. & Prettner, K., 2021. "The growth effects of anticipated versus unanticipated population aging," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    12. Frankovic, Ivan & Kuhn, Michael, 2018. "Health insurance, endogenous medical progress, and health expenditure growth," ECON WPS - Working Papers in Economic Theory and Policy 01/2018, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    13. Kuhn, Michael & Minniti, Antonio & Prettner, Klaus & Venturini, Francesco, 2023. "Medical innovation, life expectancy, and economic growth," Department of Economics Working Paper Series 342, WU Vienna University of Economics and Business.
    14. Andreas Schaefer, 2020. "Inequality, survival to adulthood, and the growth drag of pollution," Oxford Economic Papers, Oxford University Press, vol. 72(1), pages 59-79.
    15. Pintu Parui & Klaus Prettner, 2025. "Public provision of healthcare and basic research: What are the joint effects on economic growth and welfare?," Journal of Economic Growth, Springer, vol. 30(3), pages 383-415, September.
    16. Ivan Frankovic & Michael Kuhn & Stefan Wrzaczek, 2020. "On the Anatomy of Medical Progress Within an Overlapping Generations Economy," De Economist, Springer, vol. 168(2), pages 215-257, June.
    17. Frankovic, Ivan & Kuhn, Michael, 2023. "Health insurance, endogenous medical progress, health expenditure growth, and welfare," Journal of Health Economics, Elsevier, vol. 87(C).
    18. Michael Kuhn & Klaus Prettner, 2018. "Population age structure and consumption growth: evidence from National Transfer Accounts," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(1), pages 135-153, January.
    19. Frankovic, Ivan & Kuhn, Michael, 2019. "Access to health care, medical progress and the emergence of the longevity gap: A general equilibrium analysis," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).

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    Keywords

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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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