A Theory of Medicine Effectiveness, Differential Mortality, Income Inequality and Growth for Pre-industrial England
David De la Croix
Catholic University of Louvain (UCL) - Institut de Recherches Economiques et Sociales (IRES); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)
Universite Catholique de Louvain - Institut de Recherches Economiques et Sociales (IRES)
CORE Discussion Paper No. 2006/45
We study how mortality reductions and income growth interact, looking at their relationship prior to the Industrial Revolution, when income per capita was stagnant. We first present a model of individual medical spending giving a rationale for individual health expenditures even when medicine was not effective in postponing death. We then explain the rise of effective medicine by a learning process function of expenditures in health. The rise in effective medicine can then be linked to the take-off of the eighteenth century through life expectancy increases, and fostered capital accumulation. The rise of effective medicine has also an impact on the relation between growth and inequality and on the intergenerational persistence of differences in income. These channels are operative through differential mortality induced by medicine effectiveness that turns out to determines a differential in the propensity to save among income groups.
Number of Pages in PDF File: 32
Keywords: Differential mortality, Life expectancy, Propensity to save, Health expenditures
JEL Classification: J10, I12, D91, E13, N33working papers series
Date posted: August 8, 2006
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