A Theory of Medical Effectiveness, Differential Mortality, Income Inequality and Growth for Pre-Industrial England

The interactions between mortality reductions and income growth are studied, with a special attention at their relationship prior to the Industrial Revolution, when income per head was stagnant. The choice of individual medical spending is modelled, giving a rationale for individual health expenditures even when medicine is not effective in postponing death. The rise of effective medicine is then explained by a learning process function of expenditure on health. The rise in effective medicine is linked to the economic growth of the eighteenth century through life expectancy increases which foster capital accumulation. The rise of effective medicine has also had an effect on the relationship between growth and inequality and on the intergenerational persistence of differences in income. These channels are operative through differential mortality induced by medical effectiveness that turns out to determine a differential in the propensity to save among income groups.