Life Expectancy and Economic Growth: The Role of the Demographic Transition

Matteo Cervellati () and Uwe Sunde ()

No 4160, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: In this paper we investigate the causal effect of life expectancy on economic growth by explicitly accounting for the role of the demographic transition. In addition to focusing on issues of empirical identification, this paper emphasizes the role of the econometric specification. We present a simple theory of the economic and demographic transition where individuals' education and fertility decisions depend on their life expectancy. The theory predicts that before the demographic transition improvements in life expectancy primarily increase population. Improvements in life expectancy do, however, reduce population growth and foster human capital accumulation after the onset of the demographic transition. This implies that the effect of life expectancy on population, human capital and income per capita is not the same before and after the demographic transition. Moreover, a sufficiently high life expectancy is ultimately the trigger of the transition to sustained income growth. We provide evidence supporting these predictions using data on exogenous mortality reductions in the context of the epidemiological revolution.

Keywords: life expectancy; demographic transition; epidemiological revolution; heterogeneous treatment effects (search for similar items in EconPapers)
JEL-codes: E10 J10 J13 N30 O10 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-hap and nep-hea
Date: 2009-05
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Working Paper: Life Expectancy and Economic Growth: The Role of the Demographic Transition (2009)
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