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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," 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:

    1. 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.
    2. 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.
    3. Kuhn, Michael & Frankovic, Ivan & Wrzaczek, Stefan, 2017. "Medical Progress, Demand for Health Care, and Economic Performance," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168249, Verein für Socialpolitik / German Economic Association.
    4. 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.
    5. 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.
    6. repec:spr:jopoec:v:31:y:2018:i:1:d:10.1007_s00148-017-0654-z is not listed on IDEAS

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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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