Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172318
Authors: 
Baldanzi, Annarita
Prettner, Klaus
Tscheuschner, Paul
Year of Publication: 
2017
Series/Report no.: 
Hohenheim Discussion Papers in Business, Economics and Social Sciences 31-2017
Abstract: 
We analyze the economic growth effects of rising longevity in a framework of endogenous growth driven by quality-improving innovations. We show that a rise in longevity raises savings and thereby reduces the market interest rate. Since the monopoly profits generated by a successful innovation are discounted by the endogenous market interest rate, this raises the net present value of innovations, which, in turn, fosters R&D. The associated increase in the employment of scientists leads to faster technological progress and a higher long-run economic growth rate. From a welfare perspective, we show that the direct effect of an increase in life expectancy on lifetime utility is much larger than the indirect effect of the induced higher consumption due to faster economic growth. Consequently, the debate on rising health care expenditures should not predominantly be based on the growth effects of health care.
Subjects: 
long-run growth
vertical innovation
increasing life expectancy
welfare effects of changing longevity
size of health-care sectors
JEL: 
J11
J17
O31
O41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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