Endogenous life expectancy and R&D-based economic growth

Paul Tscheuschner

No 01-2021, Hohenheim Discussion Papers in Business, Economics and Social Sciences from University of Hohenheim, Faculty of Business, Economics and Social Sciences

Abstract: We propose an overlapping generations framework in which life expectancyis determined endogenously by governmental health investments. As a novelty, we are able to examine the feedback effects between life expectancy and R&D-driven economic growth for the transitional dynamics. We find that i) higher survival induces economic growth through higher savings and higherlabor force participation; ii) longevity-induced reductions in fertility hampereconomic development; iii) the positive life expectancy effects of larger savingsand higher labor force participation outweigh the negative effect of a reductionin fertility, and iv) there exists a growth-maximizing size of the health caresector that might lie beyond what is observed in most countries. Altogether, the results support a rather optimistic view on the relationship between lifeexpectancy and economic growth and contribute to the debate surroundingrising health shares and economic development.

Keywords: long-run growth; horizontal innovation; increasing life expectancy; welfare effects of changing longevity; size of health-care sectors (search for similar items in EconPapers)
JEL-codes: I15 J11 J13 J17 O41 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-age, nep-dge, nep-gro, nep-knm, nep-lab and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hohdps:012021

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