Hohenheim Discussion Papers in Business, Economics and Social Sciences No. 01-2021
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.
long-run growth horizontal innovation increasing life expectancy welfare effects of changing longevity size of health-care sectors