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New international analysis finds a positive relationship between life expectancy and productivity

A new international report published by the International Longevity Centre – UK (ILC-UK) – the country’s leading think tank focusing on the impact of our rapidly ageing society – finds that as life expectancy rises output increases per hour worked, per worker and per capita.

The report, ‘Towards a longevity dividend: Life expectancy and productivity across developed countries’ examines the effects of life expectancy on productivity across developed countries since the 1970s, analysing demographic and macroeconomic data collected by the OECD for 35 countries.

Using an instrumental variables approach, the report finds the relationship between life expectancy and productivity is robust to different productivity measures, the inclusion of a range of explanatory and control variables and different instruments.

Key findings include:

  • Life expectancy is a more powerful determinant of productivity than either the young or old age dependency ratios
  • When investigating the channels through which life expectancy boosts productivity, education is more important than employment. In this context, rising life expectancy raises the returns to education
  • There may well be a longevity dividend, whereby improvements to health result in wider economic and productivity gains in developed countries

Overall, the report analysis suggests that there may well be a longevity dividend, whereby improvements to health result in wider economic and productivity improvements. The report argues that improving health and raising life expectancy must therefore remain a key goal not only for a nation’s health and wellbeing but also for the wider economy.

Ben Franklin, Assistant Director, Research and Policy said:

‘Our analysis is important, since in many debates about long run government spending, health spending is simply seen as a drain on fiscal resources, yet if by raising life expectancy it results in productivity improvements, this could support increased tax revenue for the exchequer.

Public policy and economic forecasters should consider how best to take into account the potential fiscal benefit of better health and not neglect it in discussions of our long run sustainability.’

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