IDEAS home Printed from https://ideas.repec.org/a/cje/issued/v47y2014i4p1173-1194.html
   My bibliography  Save this article

Aging, growth and the allocation of public expenditures on health and education

Author

Listed:
  • Evangelos V. Dioikitopoulos

Abstract

In this paper, I develop an overlapping generations endogenous growth model in which both public education and health are sources of growth by affecting the accumulation rate of the human capital stock and the savings rate over life expectancy. I first find that dynamic complementarities of public expenditures lead to minimum threshold levels of public education and health expenditures that ensure sustainable growth. I then show how governments can use the allocation of public expenditures as an alternative policy instrument to maximize growth without increasing the tax rate or the retirement age, as usually happens in aging economies.

Suggested Citation

  • Evangelos V. Dioikitopoulos, 2014. "Aging, growth and the allocation of public expenditures on health and education," Canadian Journal of Economics, Canadian Economics Association, vol. 47(4), pages 1173-1194, November.
    • Handle: RePEc:cje:issued:v:47:y:2014:i:4:p:1173-1194
    DOI: 10.1111/caje.12113
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/caje.12113
    Download Restriction: access restricted to subscribers
    File URL: https://libkey.io/10.1111/caje.12113?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zhang, Jie & Zhang, Junsen & Lee, Ronald, 2003. "Rising longevity, education, savings, and growth," Journal of Development Economics, Elsevier, vol. 70(1), pages 83-101, February.
    2. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, pages 323-350, National Bureau of Economic Research, Inc.
    3. Shelton, Cameron A., 2008. "The aging population and the size of the welfare state: Is there a puzzle?," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 647-651, April.
    4. Daron Acemoglu & Simon Johnson, 2007. "Disease and Development: The Effect of Life Expectancy on Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 925-985, December.
    5. de la Croix, David & Licandro, Omar, 1999. "Life expectancy and endogenous growth," Economics Letters, Elsevier, vol. 65(2), pages 255-263, November.
    6. Matthias Doepke, 2004. "Accounting for Fertility Decline During the Transition to Growth," Journal of Economic Growth, Springer, vol. 9(3), pages 347-383, September.
    7. William F. Blankenau & Nicole B. Simpson & Marc Tomljanovich, 2007. "Public Education Expenditures, Taxation, and Growth: Linking Data to Theory," American Economic Review, American Economic Association, vol. 97(2), pages 393-397, May.
    8. Shelton, Cameron A., 2008. "Addendum: The aging population and the size of the welfare state: Is there a puzzle? [Journal of Public Economics 92 (2008) 625-671]," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2282-2283, October.
    9. Zhang, Jie & Zhang, Junsen, 2007. "Optimal social security in a dynastic model with investment externalities and endogenous fertility," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3545-3567, November.
    10. Moshe Hazan & Hosny Zoabi, 2006. "Does longevity cause growth? A theoretical critique," Journal of Economic Growth, Springer, vol. 11(4), pages 363-376, December.
    11. Rodrigo R. Soares, 2005. "Mortality Reductions, Educational Attainment, and Fertility Choice," American Economic Review, American Economic Association, vol. 95(3), pages 580-601, June.
    12. Osang, Thomas & Sarkar, Jayanta, 2008. "Endogenous mortality, human capital and economic growth," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1423-1445, December.
    13. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    14. Peter Lorentzen & John McMillan & Romain Wacziarg, 2008. "Death and development," Journal of Economic Growth, Springer, vol. 13(2), pages 81-124, June.
    15. Jie Zhang & Junsen Zhang & Michael C.M. Leung, 2006. "Health investment, saving, and public policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(1), pages 68-93, February.
    16. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    17. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers Archive 12378, Iowa State University, Department of Economics.
    18. Sanso, Marcos & Aisa, Rosa M., 2006. "Endogenous longevity, biological deterioration and economic growth," Journal of Health Economics, Elsevier, vol. 25(3), pages 555-578, May.
    19. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
    20. Blankenau, William F. & Simpson, Nicole B., 2004. "Public education expenditures and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 583-605, April.
    21. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
    22. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 645-661.
    23. Schultz, T. Paul, 1997. "Assessing the productive benefits of nutrition and health: An integrated human capital approach," Journal of Econometrics, Elsevier, vol. 77(1), pages 141-158, March.
    24. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
    25. Baldacci, Emanuele & Clements, Benedict & Gupta, Sanjeev & Cui, Qiang, 2008. "Social Spending, Human Capital, and Growth in Developing Countries," World Development, Elsevier, vol. 36(8), pages 1317-1341, August.
    26. Rivera, Berta & Currais, Luis, 1999. "Income Variation and Health Expenditure: Evidence for OECD Countries," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 258-267, October.
    27. Glomm, Gerhard, 1997. "Parental choice of human capital investment," Journal of Development Economics, Elsevier, vol. 53(1), pages 99-114, June.
    28. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
    29. Glomm, Gerhard & Kaganovich, Michael, 2008. "Social security, public education and the growth-inequality relationship," European Economic Review, Elsevier, vol. 52(6), pages 1009-1034, August.
    30. Manuel A.Gómez & Luis C.Currais, 2001. "Income variation, endogenous population growth and health subsidy," Estudios de Economia, University of Chile, Department of Economics, vol. 28(2 Year 20), pages 165-181, December.
    31. Berta Rivera & Luis Currais, 1999. "Income Variation and Health Expenditure: Evidence for OECD Countries," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 258-267, October.
    32. Rodrigo Soares, 2006. "The effect of longevity on schooling and fertility: evidence from the Brazilian Demographic and Health Survey," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(1), pages 71-97, February.
    33. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-834, August.
    34. Yew, Siew Ling & Zhang, Jie, 2009. "Optimal social security in a dynastic model with human capital externalities, fertility and endogenous growth," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 605-619, April.
    35. Blackburn, Keith & Cipriani, Giam Pietro, 2002. "A model of longevity, fertility and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 187-204, February.
    36. Gyimah-Brempong, Kwabena & Wilson, Mark, 2004. "Health human capital and economic growth in Sub-Saharan African and OECD countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(2), pages 296-320, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Panagiotis Th. Konstantinou & Andromachi Partheniou & Athanasios Tagkalakis, 2022. "A functional classification analysis of government spending multipliers," Working Papers 298, Bank of Greece.
    2. Asako Ohinata & Dimitrios Varvarigos, 2020. "Demographic Transition and Fertility Rebound in Economic Development," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(4), pages 1640-1670, October.
    3. Hafiz Syed Mohsin Abbas & Samreen Gillani & Saif Ullah & Muhammad Ahsan Ali Raza & Atta Ullah, 2020. "Nexus Between Governance and Socioeconomic Factors on Public Service Fragility in Asian Economies," Social Science Quarterly, Southwestern Social Science Association, vol. 101(5), pages 1850-1868, September.
    4. Emerson, Patrick M. & Knabb, Shawn D. & Sirbu, Anca-Ioana, 2019. "Institutional Responses to Aging Populations and Economic Growth: A Panel Data Approach," IZA Discussion Papers 12561, Institute of Labor Economics (IZA).
    5. Kiyoka Akimoto, 2021. "Corruption, mortality rates, and development: policies for escaping from the poverty trap," Journal of Economics, Springer, vol. 133(1), pages 1-26, June.
    6. George Economides & Apostolis Philippopoulos & Stylianos Sakkas, 2021. "Redistributive policies in general equilibrium," JRC Working Papers on Territorial Modelling and Analysis 2021-08, Joint Research Centre.
    7. George Economides & Hyun Park & Apostolis Philippopoulos & Stelios Sakkas, 2015. "On the Composition of Public Spending and Taxes," CESifo Working Paper Series 5510, CESifo.
    8. Kiyoka Akimoto, 2019. "Corruption, mortality rates, and development:Policies for escaping from the poverty trap," Discussion Papers in Economics and Business 18-10-Rev., Osaka University, Graduate School of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Annarita BALDANZI & Alberto BUCCI & Klaus PRETTNER, 2016. "The Effects of Health Investments on Human Capital and R&D-Driven Economic Growth," Departmental Working Papers 2016-17, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Baldanzi, Annarita & Bucci, Alberto & Prettner, Klaus, 2021. "Children’S Health, Human Capital Accumulation, And R&D-Based Economic Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 651-668, April.
    3. Pierre-Richard Agénor, 2015. "Public capital, health persistence and poverty traps," Journal of Economics, Springer, vol. 115(2), pages 103-131, June.
    4. Luciano Fanti & Luca Gori, 2014. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(2), pages 529-564, April.
    5. Daishin Yasui, 2012. "Adult Longevity and Growth Takeoff," Discussion Papers 1218, Graduate School of Economics, Kobe University.
    6. repec:got:cegedp:141 is not listed on IDEAS
    7. Strulik, Holger & Werner, Katharina, 2012. "Life Expectancy, Labor Supply, and Long-Run Growth: Reconciling Theory and Evidence," Hannover Economic Papers (HEP) dp-497, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    8. David de la Croix & Omar Licandro, 2013. "The Child is Father Of the Man: Implications for the Demographic Transition," Economic Journal, Royal Economic Society, vol. 123(567), pages 236-261, March.
    9. Francesco Ricci & Marios Zachariadis, 2013. "Education Externalities on Longevity," Economica, London School of Economics and Political Science, vol. 80(319), pages 404-440, July.
    10. Maik T. Schneider & Ralph Winkler, 2021. "Growth and Welfare under Endogenous Lifetimes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(4), pages 1339-1384, October.
    11. Jonathan J. ADAMS, 2022. "Urbanization, Long-run Growth, and the Demographic Transition," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 88(1), pages 31-37, March.
    12. Moshe Hazan & Hosny Zoabi, 2006. "Does longevity cause growth? A theoretical critique," Journal of Economic Growth, Springer, vol. 11(4), pages 363-376, December.
    13. Wei-Bin Zhang, 2014. "Endogenous population with human and physical capital accumulation," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(3), pages 231-252, September.
    14. Michael Bar & Oksana Leukhina, 2010. "The role of mortality in the transmission of knowledge," Journal of Economic Growth, Springer, vol. 15(4), pages 291-321, December.
    15. Dierk Herzer & Holger Strulik & Sebastian Vollmer, 2012. "The long-run determinants of fertility: one century of demographic change 1900–1999," Journal of Economic Growth, Springer, vol. 17(4), pages 357-385, December.
    16. Sunde, Uwe & Cervellati, Matteo, 2007. "Human Capital, Mortality and Fertility: A Unified Theory of the Economic and Demographic Transition," CEPR Discussion Papers 6384, C.E.P.R. Discussion Papers.
    17. Carlotta Balestra & Davide Dottori, 2012. "Aging society, health and the environment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 1045-1076, July.
    18. Husain, Muhammad Jami, 2010. "Contribution of health to economic development: A survey and overview," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 4, pages 1-52.
    19. Kuhn, Michael & Prettner, Klaus, 2016. "Growth and welfare effects of health care in knowledge-based economies," Journal of Health Economics, Elsevier, vol. 46(C), pages 100-119.
    20. Matteo Cervellati & Uwe Sunde, 2011. "Life expectancy and economic growth: the role of the demographic transition," Journal of Economic Growth, Springer, vol. 16(2), pages 99-133, June.
    21. Zhang W.B., 2015. "Birth And Mortality Rates, Gender Division Of Labor, And Time Distribution In The Solow Growth Model," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 24(1), pages 121-134.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:47:y:2014:i:4:p:1173-1194. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prof. Werner Antweiler (email available below). General contact details of provider: https://edirc.repec.org/data/ceaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.