When Lucas Meets Nelson-Phelps∗

This paper revisits the relationship between health and growth in light of modern endogenous growth theory. We propose an unified framework that encompasses the growth effects of both, the accumulation and the level of health. Based on cross-country regressions where we instrument for both variables, we find that a higher initial level and a higher rate of improvement in life expectancy, both have a significantly positive impact on per capita GDP growth. Then, restricting attention to OECD coun-tries, we find supportive evidence that only the reduction in mortality below age forty generates productivity gains, which in turn may explain why the positive correlation relationship between health and growth in cross-OECD country regressions is weaker over the contemporary period. ∗This research was commissioned by the LIR, which we gratefully acknowledge. We are most grateful to Brigitte Calle and Agnes Renard-Viard for their continuous support and encouragements, and to Daron Acemoglu, Simon Johnson, Peter Lorentzen and Romain Wacziarg for kindly sharing their data and providing very helpful suggestions. We also thank Gabrielle Fack for her help at an earlier stage of the project. This paper has also benefited from helpful comments from Abhijit Banerjee, Esther Duflo, Thomas Piketty, and David Weil. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and in particular they do not necessarily represent the views of the OECD. †Harvard Universit