IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Life Expectancy, Labor Supply, and Long-Run Growth: Reconciling Theory and Evidence

  • Strulik, Holger
  • Werner, Katharina

We set up a three-period overlapping generation model in which young individuals allocate their time to schooling and work, healthy middle aged individuals allocate their time to leisure and work and their income to consumption and savings for retirement, and old age individuals live off their savings. The three period setup allows us to distinguish between longevity and active life expectancy (i.e. the expected length of period 1 and 2). We show that individuals optimally respond to a longer active life by educating more and, if the labor supply elasticity is high enough, by supplying less labor. We calibrate the model to US data and show that the historical evolution of increasing education and declining labor supply can be explained as an optimal response to increasing active life expectancy. We integrate the theory into a unified growth model and reestablish increasing life expectancy as an engine of long-run economic development.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-497.pdf
Download Restriction: no

Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-497.

as
in new window

Length: 33 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:han:dpaper:dp-497
Contact details of provider: Postal:
Koenigsworther Platz 1, D-30167 Hannover

Phone: (0511) 762-5350
Fax: (0511) 762-5665
Web page: http://www.wiwi.uni-hannover.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  2. Sebnem Kalemli-Ozcan & David Weil, 2002. "Mortality Change, the Uncertainty Effect, and Retirement," Macroeconomics 0212006, EconWPA.
  3. Matteo Cervellati & Uwe Sunde, 2011. "Life expectancy and economic growth: the role of the demographic transition," Journal of Economic Growth, Springer, vol. 16(2), pages 99-133, June.
  4. Cervellati, Matteo & Sunde, Uwe, 2007. "Human Capital, Mortality and Fertility: A Unified Theory of the Economic and Demographic Transition," CEPR Discussion Papers 6384, C.E.P.R. Discussion Papers.
  5. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  6. Maddison, A., 1991. "A Long Run Perspective on Saving," Papers 443, Groningen State, Institute of Economic Research-.
  7. Valerie Ramey & Neville Francis, 2006. "A Century of Work and Leisure," Working Papers id:546, eSocialSciences.
  8. Philippe Aghion & Peter Howitt & Fabrice Murtin, 2010. "The Relationship Between Health and Growth: When Lucas Meets Nelson-Phelps," NBER Working Papers 15813, National Bureau of Economic Research, Inc.
  9. Boucekkine, Raouf & de la Croix, David & Licandro, Omar, 2002. "Vintage Human Capital, Demographic Trends, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 104(2), pages 340-375, June.
  10. d'Albis, Hippolyte & Lau, Paul & Sanchez-Romero, Miguel, 2010. "Mortality transition and differential incentives for early retirement," LERNA Working Papers 10.21.327, LERNA, University of Toulouse.
  11. Casper Hansen & Lars Lønstrup, 2012. "Can higher life expectancy induce more schooling and earlier retirement?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(4), pages 1249-1264, October.
  12. Seema Jayachandran & Adriana Lleras-Muney, 2009. "Life Expectancy and Human Capital Investments: Evidence from Maternal Mortality Declines," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 349-397.
  13. Moshe Hazan, 2009. "Longevity and Lifetime Labor Supply: Evidence and Implications," Econometrica, Econometric Society, vol. 77(6), pages 1829-1863, November.
  14. Holger Strulik, 2005. "The Role of Human Capital and Population Growth in R&D-based Models of Economic Growth," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 129-145, 02.
  15. Oded Galor, 2011. "Unified Growth Theory," Economics Books, Princeton University Press, edition 1, number 9477, 06-2016.
  16. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  17. David N. Well, 2007. "Accounting for the Effect Of Health on Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1265-1306.
  18. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, September.
  19. Galor, Oded, 2004. "From Stagnation to Growth: Unified Growth Theory," CEPR Discussion Papers 4581, C.E.P.R. Discussion Papers.
  20. Sheshinski, Eytan, 2009. "Uncertain Longevity and Investment in Education," MPRA Paper 53144, University Library of Munich, Germany.
  21. Matteo Cervellati & Uwe Sunde, 2005. "Human Capital Formation, Life Expectancy, and the Process of Development," American Economic Review, American Economic Association, vol. 95(5), pages 1653-1672, December.
  22. Robert Tamura, 2002. "Human capital and economic development," FRB Atlanta Working Paper 2002-5, Federal Reserve Bank of Atlanta.
  23. Javier Birchenall, 2007. "Escaping high mortality," Journal of Economic Growth, Springer, vol. 12(4), pages 351-387, December.
  24. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
  25. Rodrigo R. Soares, 2004. "Mortality Reductions, Educational Attainment, and Fertility Choice," Econometric Society 2004 North American Winter Meetings 9, Econometric Society.
  26. Peter Lorentzen & John McMillan & Romain Wacziarg, 2008. "Death and development," Journal of Economic Growth, Springer, vol. 13(2), pages 81-124, June.
  27. Daron Acemoglu & Simon Johnson, 2006. "Disease and Development: The Effect of Life Expectancy on Economic Growth," NBER Working Papers 12269, National Bureau of Economic Research, Inc.
  28. BOUCEKKINE, Raouf & DE LA CROIX, David & LICANDRO, Omar, . "Early mortality declines at the dawn of modern growth," CORE Discussion Papers RP 1681, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  29. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
  30. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
  31. Alan B. Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," NBER Working Papers 7591, National Bureau of Economic Research, Inc.
  32. Hazan, Moshe & Zoabi, Hosny, 2005. "Does Longevity Cause Growth?," CEPR Discussion Papers 4931, C.E.P.R. Discussion Papers.
  33. Chad Turner & Robert Tamura & Sean Mulholland & Scott Baier, 2007. "Education and income of the states of the United States: 1840–2000," Journal of Economic Growth, Springer, vol. 12(2), pages 101-158, June.
  34. Zhang, Jie & Zhang, Junsen & Lee, Ronald, 2003. "Rising longevity, education, savings, and growth," Journal of Development Economics, Elsevier, vol. 70(1), pages 83-101, February.
  35. Oded Galor, 2006. "The Demographic Transition," Working Papers 2006-24, Brown University, Department of Economics.
  36. David de la Croix & Omar Licandro, . "Life expectancy and endogenous growth," Working Papers 97-23, FEDEA.
  37. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  38. Sebnem Kalemli-Ozcan, 2008. "The uncertain lifetime and the timing of human capital investment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(3), pages 557-572, July.
  39. Robert J. Gordon, 1999. "U.S. Economic Growth since 1870: One Big Wave?," American Economic Review, American Economic Association, vol. 89(2), pages 123-128, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:han:dpaper:dp-497. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Heidrich, Christian)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.