infonet-economy

This paper investigates the causal effect of life expectancy on economic growth by explicitlyaccounting for the role of the demographic transition. We present a simple microfounded theory of the economic and demographic transition that predicts that improvements in life expectancy primarily mainly increase population before the demographic transition, but reduce population growth and foster human capital accumulation after the demographic transition. 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.