.. Longevity beyond the Transition
ency burden when fertility falls, as it seems inevitably to do in wealthier countries? Wouldn’t it be more rational to trim health care budgets — since health is the budget item most directly responsible for survival and apparently least related to capital growth — to acheive survival through the productive years without promoting “wasteful” longevity? Shouldn’t budget planners be optimising inputs here to ensure that people live just long enough to pay their taxes and then shuffle-off before they become a burden on the next generations? If the “bonus to onus” story is taken at face value, then: yes. But just as we saw the gigantic value of longevity lies mostly hidden below the surface of growth accounting, so health spending has been somewhat arbitrarily treated in aempts to understand trends in economic growth. Typically, economists’ models of the pathway to economic growth treat the level of health care spending as a “given”, not determined by demand in the model. Recently, researchers in Hong Kong aempted to account for growth with health care demand as a variable to be determined by interactions in the model between health care, life expectancy and economic growth, based on observed behaviour. In this model, health care like other investments adds to the stock of (human) capital. e probability of survival of individuals to the second period depends on the stock of health capital. is results in two opposing effects on economic growth: on the one hand spending on health diverts capital from other productive uses in the economy but it also increases life-expectancy which encourages capital formation. e intuition is that people who look forward to a long healthspan save accordingly; for example into their pension funds or building an enduring business. e research shows that economic output, per-capita income and welfare are higher in model economies where health care is treated as a variable than in models where health care and life-expectancy are ignored (or “given”) and that income and welfare increase as health care spending and life-expectancy increase.⁹⁹ In short, a more fine-grained account of the relationship between economic growth and longevity suggests we may not need to worry too much about the “onus.” e positive impact on per capita income arising from higher savings by individuals who anticipate a long healthspan could be large enough to outweigh the negative impact for growth and welfare of a higher dependency ratio.
. Longevity beyond the Transition Dual reductions in early and late mortality have lengthened life expectancy at birth, which is nothing more than the expected median (mean = “average”) age of death for any birth-year cohort. Because infant mortality dropped quickly in the ᵗʰ and ᵗʰ centuries, life expectancy also grew rapidly, as we saw in Table on page . Improvement in later-life mortality also made a contribution to the advancing mean, but the overall rate at which life expectancy is growing has slowed as the potential gains from further “rectangularization” of the survival curve have become smaller and smaller.¹⁰⁰ e projected survival curves in Figure (page ) for and ⁹⁹ ☞ Michael C. M. Leung and Yong Wang. “ENDOGENOUS HEALTH CARE, LIFE EXPECTANCY AND ECONOMIC GROWTH”. In: Pacific Economic Review . (Feb. ), pp. –. : X ¹⁰⁰See Table A and the assessment of the U.N. forecasts by S. Jay Olshansky (p. ) in ☞ United Nations. WORLD POPULATION TO . New York,