Abstract: 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 income. I note that death is like a tax on human-capital investments, which suggests the use of a standard public-ﬁnance 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 5% 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.
Friday, Oct. 26, 2016
3:30pm – 5:00pm