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Sources of U.S. Longevity Increase, 1960-1997

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  • Frank R. Lichtenberg

Abstract

Between 1960 and 1997, life expectancy at birth of Americans increased approximately 10% - from 69.7 to 76.5 years - and it has been estimated that the value of life extension during this period nearly equaled the gains in tangible consumption. We investigate whether an aggregate health production function can help to explain the substantial fluctuations in the rate of increase in longevity since 1960. We view longevity as the output of the health production function, and output fluctuations as the consequence of fluctuations in medical inputs (expenditure) and technology. We estimate longevity models using annual U.S. time-series data on life expectancy, health expenditure, and medical innovation. Reliable annual data are available for only one type of innovation - new drugs - but pharmaceutical R&D accounts for a significant fraction of total biomedical research. The empirical analysis provides strong support for the hypothesis that both medical innovation (in the form of new drug approvals) and expenditure on medical care (especially public expenditure) contributed to longevity increase during the period 1960-1997. The estimates imply that the medical expenditure needed to gain one life-year is about $11,000, and that the pharmaceutical R&D expenditure needed to gain one life-year is about $1,345. Previous researchers have estimated that the average value of a life-year is approximately $150,000.

Suggested Citation

  • Frank R. Lichtenberg, 2002. "Sources of U.S. Longevity Increase, 1960-1997," NBER Working Papers 8755, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8755
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    1. Lichtenberg Frank R., 2002. "The Effects of Medicare on Health Care Utilization and Outcomes," Forum for Health Economics & Policy, De Gruyter, vol. 5(1), pages 1-29, January.
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    Cited by:

    1. Matteo Cervellati & Uwe Sunde, 2015. "The Economic and Demographic Transition, Mortality, and Comparative Development," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 189-225, July.
    2. Maarten Lindeboom & France Portrait & Gerard J. van den Berg, 2003. "Individual Mortality and Macro-Economic Conditions from Birth to Death," Tinbergen Institute Discussion Papers 03-072/3, Tinbergen Institute, revised 14 Oct 2003.
    3. Erika Laranjeira & Helena Szrek, 2016. "Going beyond life expectancy in assessments of health systems’ performance: life expectancy adjusted by perceived health status," International Journal of Health Economics and Management, Springer, vol. 16(2), pages 133-161, June.
    4. Louise Sheiner, 2009. "Intergenerational aspects of health care," Finance and Economics Discussion Series 2009-38, Board of Governors of the Federal Reserve System (U.S.).
    5. Giorgio Brunello & Pierre-Carl Michaud & Anna Sanz de Galdeano, 2008. "The Rise in Obesity Across the Atlantic: An Economic Perspective," Working Papers 2008-21, FEDEA.
    6. Brunello, Giorgio & Michaud, Pierre-Carl & Sanz-de-Galdeano, Anna, 2008. "The Rise in Obesity across the Atlantic: An Economic Perspective," IZA Discussion Papers 3529, Institute for the Study of Labor (IZA).
    7. Gupta, Shivani & Bansal, Sangeeta, 2020. "Health Implications of Obesity: An Evidence from India," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304438, Agricultural and Applied Economics Association.
    8. Oleksiy Ivaschenko, 2004. "Longevity in Russia's Regions: Do Poverty and Low Public Health Spending Kill?," WIDER Working Paper Series RP2004-40, World Institute for Development Economic Research (UNU-WIDER).
    9. Parida Wubulihasimu & Werner Brouwer & Pieter van Baal, 2016. "The Impact of Hospital Payment Schemes on Healthcare and Mortality: Evidence from Hospital Payment Reforms in OECD Countries," Health Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 1005-1019, August.
    10. James Thornton & Jennifer Rice, 2008. "Does extending health insurance coverage to the uninsured improve population health outcomes?," Applied Health Economics and Health Policy, Springer, vol. 6(4), pages 217-230, October.
    11. Joseph Cook & Graeme Hunter & John Vernon, 2009. "The Future Costs, Risks and Rewards of Drug Development," PharmacoEconomics, Springer, vol. 27(5), pages 355-363, May.
    12. John Vernon & Joseph Golec & J. Stevens, 2010. "Comparative Effectiveness Regulations and Pharmaceutical Innovation," PharmacoEconomics, Springer, vol. 28(10), pages 877-887, October.
    13. Casper van Ewijk & Erik Canton & Paul Tang, 2004. "Ageing and international capital flows," CPB Document 43.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

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    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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