Longer lives did not begin with an already-modern health system. In recent work with Leon Huetsch and Dirk Krueger, we argue that economic growth first made basic health investments affordable and only later created the market that pulled frontier medical innovation into existence.
It is easy to think of modern medicine as a permanent feature of rich economies. Historically, though, it is surprisingly recent. For a 20-year-old in the United States, remaining life expectancy hovered at around 40 years until the mid-19th century. By 2020, it had risen above 60. Over the same long run, health moved from a marginal activity to a sector absorbing close to one fifth of spending.
That raises two linked questions. Why did adult life expectancy begin to rise well before the modern health sector took off? And why did that sector emerge so late, despite the obvious value people place on living longer?
In our paper, we build a quantitative model to answer both questions together. The central idea is simple: growth mattered twice. First, it let households spend more on basic health. Later, it created enough demand for longevity to redirect innovation towards medicine. That three-stage story helps explain not only why people live longer, but also why health spending rises so sharply once economies become rich.
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