Mortality Decline, Human Capital Investment and Economic Growth

We examine the role of increased life expectancy in raising human capital investment during the process of economic growth. We develop a continuous time, overlapping generations model in which individuals make optimal schooling investment choices in the face of a constant probability of death. We present analytic results, followed by results from a calibrated version of the model using realistic estimates of the return to schooling. Mortality decline produces economically significant increases in schooling and consumption. Allowing schooling to vary endogenously produces a much larger response of consumption and capital to mortality decline than is observed when schooling is held fixed.

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