Exploiting cross-state variation in infectious causes of death, along with time variation arising from medical innovations toward the middle of the twentieth century, this study examines the consequences of a positive health shock in the US. It establishes that states with higher levels of mortality from infectious causes prior to the onset of the era of big medicine experienced greater increases in life expectancy, population, and total GDP after its onset, whereas per capita GDP remained largely unchanged. Together the evidence suggests that the rise in life expectancy had no significant effect on living standards in the US during the time period 1940-1980. These results are robust to controlling for initial health and initial economic conditions. (C) 2014 Elsevier B.V. All rights reserved.
