Longevity-induced vertical innovation and the tradeoff between life and growth

Arbeitspapier

We analyze the economic growth effects of rising longevity in a framework of endogenous growth driven by quality-improving innovations. We show that a rise in longevity raises savings and thereby reduces the market interest rate. Since the monopoly profits generated by a successful innovation are discounted by the endogenous market interest rate, this raises the net present value of innovations, which, in turn, fosters R&D. The associated increase in the employment of scientists leads to faster technological progress and a higher long-run economic growth rate. From a welfare perspective, we show that the direct effect of an increase in life expectancy on lifetime utility is much larger than the indirect effect of the induced higher consumption due to faster economic growth. Consequently, the debate on rising health care expenditures should not predominantly be based on the growth effects of health care.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Hohenheim Discussion Papers in Business, Economics and Social Sciences ; No. 31-2017

Classification and Topics

• Classification: Wirtschaft ; Demographic Trends, Macroeconomic Effects, and Forecasts ; Value of Life; Forgone Income ; Innovation and Invention: Processes and Incentives ; One, Two, and Multisector Growth Models
• Subject: long-run growth ; vertical innovation ; increasing life expectancy ; welfare effects of changing longevity ; size of health-care sectors

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baldanzi, Annarita ; Prettner, Klaus ; Tscheuschner, Paul
• Event: Veröffentlichung
• (who): Universität Hohenheim, Fakultät Wirtschafts- und Sozialwissenschaften
• (where): Stuttgart
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/172318
• URN: urn:nbn:de:bsz:100-opus-14199
• Last update: 10.03.2025, 11:42 AM CET