American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Human Capital Formation, Life Expectancy, and the Process of Development
American Economic Review
vol. 95,
no. 5, December 2005
(pp. 1653–1672)
Abstract
We provide a unified theory of the transition in income, life expectancy, education, and population size from a nondeveloped environment to sustained growth. Individuals optimally trade off the time cost of education with its lifetime returns. Initially, low longevity implies a prohibitive cost for human capital formation for most individuals. A positive feedback loop between human capital and increasing longevity, triggered by endogenous skill-biased technological progress, eventually provides sufficient returns for widespread education. The transition is not based on scale effects and induces population growth despite unchanged fertility. A simulation illustrates that the dynamics fit historical data patterns.Citation
Cervellati, Matteo, and Uwe Sunde. 2005. "Human Capital Formation, Life Expectancy, and the Process of Development." American Economic Review, 95 (5): 1653–1672. DOI: 10.1257/000282805775014380Additional Materials
JEL Classification
- J11 Demographic Trends, Macroeconomic Effects, and Forecasts
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- N33 Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: Europe: Pre-1913
- N34 Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: Europe: 1913-