The Determinants of Life Expectancy: An Analysis of the OECD Health Data (Organization for Economic Cooperation and Development‪)‬

1. Introduction This study is concerned with understanding the determinants of life expectancy in developed countries. The level (and variability) of life expectancy has important implications for individual and aggregate human behavior; it affects fertility behavior, economic growth, human capital investment, intergenerational transfers, and incentives for pension benefit claims (Zhang, Zhang, and Lee 2001: Coile et al. 2002). From the social planners perspective, it has implications for public finance. For example, Gradstein and Kaganovich (2004) conclude that increasing longevity results in increasing public funding of education and economic growth. Cremer, Lozachmeur, and Pestieau (2004, p. 2260) argue that early retirement "puts pressure on the financing of healthcare and pension schemes [and this pressure] is made worse by growing longevity." While typically assumed strictly exogenous for the purpose of policy analysis, it has been argued that life expectancy (or more broadly "'health") is predetermined by behavioral and policy variables in what can be loosely described as a production function for health. Estimating this function is the goal of this study.