Longevity, Education, and Income: How Large is the Triangle?
Monday, 10/3/2016, 12:00 pm to 1:00 pm. ARCHIVED EVENT
Location: 6050 ISR - Thompson
While health affects economic development through a variety of pathways, one commonly suggested mechanism is a "horizon" channel in which increased longevity induces additional education. A recent literature devotes much attention to how much education responds to increasing longevity, but this study asks instead what impact this specific channel has on well-being. I note that death is like a tax on human-capital investments, which suggests the use of a standard public-economics tool: triangles. I construct estimates of the triangle gain if education adjusts to lower adult mortality. Even for implausibly large responses of education to survival differences, almost all of today's low-human-development countries would gain less than 15% of income through this channel if switched to Japan's survival curve. Similarly, increased survival in the 20th-century USA generates a triangle less than a few percent of initial income. Calibrating the model with well-identified micro- and cohort-level studies, I find that the horizon triangle for the typical low-income country is at most a percent or two of income.