Life expectancy and human capital: New empirical evidence

Trung Vu

Health Economics, 2023, vol. 32, issue 2, 395-412

Abstract: This paper re‐examines a well‐established hypothesis postulating that life expectancy augments incentives for human capital accumulation, leading to global income differences. A major distinguishing feature of the current study is to estimate heterogeneous panel data models under a common factor framework, which explicitly accounts for parameter heterogeneity, unobserved common factors (UCFs), and variables' non‐stationarity. In sharp contrast to most previous studies, I find that the impact of health improvements on human capital accumulation turns out to be imprecisely estimated at conventionally accepted levels of statistical significance. I demonstrate that conventional estimates of the educational returns to rising longevity are derived from estimating misspecified models at least partially due to parameter heterogeneity and the presence of UCFs.

Date: 2023
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https://doi.org/10.1002/hec.4626

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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:32:y:2023:i:2:p:395-412

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