From Physical to Human Capital Accumulation: Effects of Mortality Changes

This paper develops a growth model ‘a la Galor and Moav (Review of Economic Studies 71(4):1001?1026, 2004) that captures the replacement of physical capital accumulation by human capital accumulation as the prime engine of growth. We show that (i) decreased mortality promotes this replacement, and (ii) the effect of a decrease in mortality on percapita income differs across the phases of the development process. A notable prediction of our theory is that the higher the level of education in an economy, the more likely it is that a decrease in mortality will increase income per capita. Using finite mixture models, we show that this prediction is supported by the data.