Working Paper: CEPR ID: DP7361
Authors: Matteo Cervellati; Uwe Sunde
Abstract: In this paper we investigate the causal effect of life expectancy on economic growth by explicitly accounting for the role of the demographic transition. In addition to focusing on issues of empirical identification, this paper emphasizes the role of the econometric specification. We present a simple theory of the economic and demographic transition where individuals' education and fertility decisions depend on their life expectancy. The theory predicts that before the demographic transition improvements in life expectancy primarily increase population. Improvements in life expectancy do, however, reduce population growth and foster human capital accumulation after the onset of the demographic transition. This implies that the effect of life expectancy on population, human capital and income per capita is not the same before and after the demographic transition. Moreover, 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.
Keywords: Demographic Transition; Epidemiological Revolution; Heterogeneous Treatment Effects; Life Expectancy
JEL Codes: E10; J10; J13; N30; O10; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| life expectancy (J17) | population growth (J11) |
| population growth (J11) | per capita income (D31) |
| life expectancy (J17) | per capita income (D31) |
| demographic transition (J11) | life expectancy (J17) |
| life expectancy (J17) | human capital accumulation (J24) |
| human capital accumulation (J24) | per capita income (D31) |
| sufficiently high life expectancy (D15) | demographic transition (J11) |