The Relationship Between Health and Growth: When Lucas Meets Nelson-Phelps



This paper revisits the relationship between health and growth in light of modern endogenous growth theory. We propose an unified framework that encompasses the growth effects of both, the accumulation and the level of health. Based on cross-country regressions where we instrument for both variables, we find that a higher initial level and a higher rate of improvement in life expectancy, both have a significantly positive impact on per capita GDP growth. Then, restricting attention to OECD countries, we find supportive evidence that only the reduction in mortality below age forty generates productivity gains, which in turn may explain why the positive correlation relationship between health and growth in cross-OECD country regressions is weaker over the contemporary period.

Last updated on 12/04/2012