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Effects of life expectancy on economic growth: New results using the flexible Box-Cox power transformation model

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  • Okunade, Albert
  • Osmani, Ahmad

Abstract

This article revisits the effects of life expectancy (LE) on economic growth (IPC) reported in previous research. Maximum likelihhod (ML) estimates are obtained based on the monotonic nonlinear flexible Box-Cox power transformation regression model. This variance stabilizing model, unlike the a priori restrictive nested log and linear forms, is a parametrically richer flexible functional form for transforming the dependent and independent variables separately with different power parameters. The conditional life expectancy elasticity of income estimates are found to vary across fitted models and the more robust flexible Box-Cox power model outperforms the restrictive linear and log specifications fitted in past work. Contrary to past findings indicating large negative and highly elastic (statistically significant) life expectancy (LE) elasticity of income (INC), new results from the preferred fully flexible Box-Cox model incorporating the nonlinear effect yield a much smaller negative (statistically significant) and inelastic life expectancy elasticity of income estimate. Study explores some policy options for enhancing economic growth during periods of high or rising life expectancy.

Suggested Citation

  • Okunade, Albert & Osmani, Ahmad, 2020. "Effects of life expectancy on economic growth: New results using the flexible Box-Cox power transformation model," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Latest Ar.
    • Handle: RePEc:zbw:espost:211089
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    1. Matteo Cervellati & Uwe Sunde, 2011. "Life expectancy and economic growth: the role of the demographic transition," Journal of Economic Growth, Springer, vol. 16(2), pages 99-133, June.
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    Cited by:

    1. Qu, Yingge & Kumar, V. & Zhao, Yi, 2023. "A dynamic model of the contract length and early termination: The roles of technology evolution and pricing strategy," Journal of Business Research, Elsevier, vol. 167(C).

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    More about this item

    Keywords

    flexible Box-Cox transformation; non-linearity; economic growth; elasticity;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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