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Public health spending, old-age productivity and economic growth: Chaotic cycles under perfect foresight

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  • Fanti, Luciano
  • Gori, Luca

Abstract

This paper analyses the dynamics of a double Cobb-Douglas economy with overlapping generations and public health investments that affect the supply of efficient labour of the old-aged. It is shown that the positive steady state of the economy is unique. Moreover, we provide necessary and sufficient conditions for the emergence of endogenous deterministic complex cycles when individuals are perfectly foresighted. Interestingly, (i) the equilibrium dynamics shows rather complicated phenomena such as a multiplicity of bubblings depending on the size of the public health system, and (ii) the higher the degree of thriftiness, the likelier an economy is exposed to endogenous fluctuations because the need to save when young to support consumption when old is reduced.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 78 (2011)
Issue (Month): 1-2 (April)
Pages: 137-151

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Handle: RePEc:eee:jeborg:v:78:y:2011:i:1-2:p:137-151

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Keywords: Old-age labour productivity OLG model Perfect foresight Public health expenditure;

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Citations

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Cited by:
  1. Nathalie Mathieu-Bolh & Xavier Pautrel, 2014. "Environmental taxation, health and the life-cycle," Working Papers hal-00930936, HAL.
  2. Luca Gori & Mauro Sodini, 2011. "Nonlinear Dynamics in an OLG Growth Model with Young and Old Age Labour Supply: The Role of Public Health Expenditure," Computational Economics, Society for Computational Economics, vol. 38(3), pages 261-275, October.
  3. Potrafke, Niklas, 2010. "The growth of public health expenditures in OECD countries: Do government ideology and electoral motives matter?," Journal of Health Economics, Elsevier, vol. 29(6), pages 797-810, December.
  4. Dimitrios Varvarigos, 2013. "Endogenous Cycles and Human Capital," Discussion Papers in Economics 13/18, Department of Economics, University of Leicester.

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