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Growth and Welfare under Endogenous Lifetime

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  • Schneider, Maik
  • Winkler, Ralph

Abstract

Welfare aspects of longevity increases are often discussed neglecting the complex relationship between longevity and economic growth, which is the focal point of another literature. Combining both perspectives, we develop an endogenous growth OLG-framework to investigate how longevity affects economic growth and welfare. In our model, life expectancy is determined endogenously by individuals' investments in healthcare. In our benchmark specification growth effects are small, but direct welfare gains from longer lifetimes can be substantial. In the generalized model specification the growth effect dominates and may even lead to overall welfare losses from longevity increases. We interpret our results with respect to real world data and discuss the importance of assumptions about the engine of growth as well as the externalities associated with healthcare investments.

Suggested Citation

  • Schneider, Maik & Winkler, Ralph, 2013. "Growth and Welfare under Endogenous Lifetime," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80018, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:80018
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    Cited by:

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    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. 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.
    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. 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.
    6. 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.
    7. Bloom, David E. & Kuhn, Michael & Prettner, Klaus, 2018. "Health and Economic Growth," IZA Discussion Papers 11939, Institute of Labor Economics (IZA).
    8. 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.
    9. 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).
    10. 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.
    11. 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.
    12. 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.
    13. 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.
    14. 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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    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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