BREAD Working Paper No. 532, January 2018

Longevity, Education, and Income: How Large is the Triangle?

Hoyt Bleakley

Abstract

While health affects economic development and wellbeing 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, while this study asks instead what impact this specific channel has on wellbeing (welfare). 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, if switched instantaneously to Japan’s survival curve, would place a value on this channel of less than 15% of 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 instead less than a percent of lifetime income. Gains from increased survival in the 20th-century are similarly sized.

Keywords: life expectancy, horizon, health, efficiency loss, Harberger triangles

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