Endogenous lifetime and economic growth

Conventional wisdom attributes the severity of mortality in poorer countries to widespread poverty and inadequate living conditions. This paper considers the possibility that persistent poverty may arise, in turn, from a high incidence of mortality. Endogenous mortality risk is introduced in a two-period overlapping generations model: probability of survival from the ̄rst period to the next depends upon health capital that can be augmented through public investment. High mortality societies do not grow fast since shorter lifespans discourage saving and investment; multiple steady-states are possible. High mortality also reduces returns on investments, like education, where risks are undiversi ̄able. When human capital drives economic growth, countries di®ering in only health capital do not converge to similar living standards; `threshold e®ects' may also result.