IZA DP No. 585: Human Capital Formation, Life Expectancy and the Process of Economic Development
revised version published in: American Economic Review, 2005, 95 (5), 1653-1672
This paper provides a unified theory of the transition in income, life expectancy, education and population, experienced by the Western world when passing from an environment of economic stagnation to sustained growth. The transition is based on the interplay between human capital formation, technological progress, and life expectancy. A positive feedback between human capital accumulation and longevity is eventually triggered when endogenous skill-biased technological progress provides sufficiently high returns to human capital for large fractions of the population to outweigh the costs in terms of lifetime spent on education.