Effect of mortality reductions on economic growth in the United States, 1940–1975

Abstract

A decline in mortality enlarges population, employment and hence total production of the economy. It also raises capital accumulation indirectly because greater population, employment and production bring about greater demand for capital goods and larger volume of savings. The additional capital stock accumulated further promotes future growth. In previous studies, the effect of mortality reductions on population and labor force has only been partially estimated and the effect through capital accumulation goes totally unrecognized.

This study applies a population-projection model and an aggregate econometric model to investigate more completely the effect of mortality reductions since 1940 on economic variables in the U.S. in 1975. The population-projection model is used to estimate what the population in 1975 would have been if the death rates in 1940 had not been reduced thereafter. The difference between the actual population and the estimated population represents the effect of the decline in mortality on population. To estimate the growth effect of the resultant increase in population, an aggregate econometric model is used to simulate the economy. It is found that mortality reductions since 1940 raised the population in 1975 by 8.3% (17.7 million persons) and the employment by 6.23% (5.40 million). About 8.3% ($100.27 billion at 1972 prices) of GNP in 1975 was attributable to the declines in the death rates. Of the $100.27 billion increase in GNP in 1975, 62.2% was due to the increase in employment and the other 37.8% was thanks to the rise in capital stock. Per capita GNP in 1975, however, would have been about the same even without the decline in the death rates. This study demonstrates the importance of adopting a general-equilibrium approach and using per capita output as a criterion for the evaluation of the economic contribution of mortality reductions.