Fakultät Wirtschafts- und Sozialwissenschaften. Institut für Volkswirtschaftslehre
Abstract
We propose an overlapping generations framework in which life expectancyis determined endogenously by governmental health investments. As a nov-elty, we are able to examine the feedback effects between life expectancy andR&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
