Life Expectancy, Schooling Time, Retirement, and Growth

By Echevarria, Cruz A. | Economic Inquiry, October 2004 | Go to article overview

Life Expectancy, Schooling Time, Retirement, and Growth


Echevarria, Cruz A., Economic Inquiry


I analyze how changes in life expectancy affect retirement age, education time, and growth rates of economies. I set up a continuous time, overlapping generations model of endogenous growth with externalities in human capital production. I find that increases in life expectancy give rise to first, higher retirement ages and second, higher education spans. A threshold level for life expectancy exists such that per capita growth rates follow an inverted U pattern.

I. INTRODUCTION

In this article I analyze how changes in life expectancy may affect optimal education time, retirement age, and the growth rates of economies. To this end I set up a continuous time, overlapping generations growth model with human capital accumulation that I solve numerically. The issue of the effects of the reduction in mortality rates and the resulting increases in life expectancy on economic growth rates has been recently addressed in the literature through both empirical and theoretical studies. Along these lines I focus on human capital acquisition and its transmission across generations as the force driving the growth rate.

Concerning empirical studies, the hypothesis that the reduction in mortality rates has caused higher levels of investment in human capital and therefore augmented growth rates is partially supported for various economies. Thus, Kalemli-Ozcan et al. (2000) show an increase in life expectancy at birth along with an increase in average numbers of years of schooling in England. They claim that after averaging across lower-income countries, there is apparently a connection between increases in life expectancy at birth and increases in gross secondary school enrollment that is positively connected with higher growth rates observed. Preliminary data from Latin American and Caribbean countries show that gross domestic product (GDP) growth is statistically associated with life expectancy: For instance, estimates based on data from Mexico suggest that for any additional year of life expectancy there will be an additional 1% increase in GDP 15 years later (see World Health Organization 1999, box 1.2, 9). Along the same lines, Rodriguez and Sachs (1999) also find a positive effect of life expectancy on GDP growth for the case of Venezuela. Barro and Sala-i-Martin (1995) estimate for a sample of 97 countries that a 13-year increment in life expectancy would increase the per capita growth rate by 1.4% per year. They also find, however, some exceptions where increments in life expectancy have not resulted in higher growth, even though all of them exhibited higher schooling levels in the period 1960-85. Malmberg (1994) gives another exception: Higher growth was achieved when middle-aged persons were numerous, whereas increases in dependent age groups led to lower per capita growth in Sweden. Finally, some other studies find mixed evidence, so that increments in life expectancy result in higher growth rates for low levels of life expectancy but in lower growth rates for high levels of life expectancy (see Zhang et al. 2003 and references therein).

A common result in most theoretical studies that include some sort of human capital is that an increase in life expectancy lengthens the period needed to recover investment in human capital, which translates into higher returns to individual education or human capital investment. This augmented return will give rise to higher levels of investment in human capital, which in turn will raise growth rates. Ehrlich and Lui (1991) show in a three overlapping generations model how improvements in longevity lower fertility, thus raising educational investment and long-term growth. Meltzer (1995) finds that mortality reductions may favor economic growth by increasing educational investment. Kalemli-Ozcan et al. (2000) show in an overlapping generations model a la Blanchard that if mortality drops, life expectancy increases, so that an augmented life horizon to enjoy the return to human capital investment gives rise to higher schooling (human capital investment), although growth is not affected because the growth rate in their model is identically equal to zero. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Life Expectancy, Schooling Time, Retirement, and Growth
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.