Endogenous mortality, human capital and economic growth
AbstractWe consider growth and welfare effects of lifetime-uncertainty in an economy with human capital-led endogenous growth. We argue that lifetime uncertainty reduces private incentives to invest in both physical and human capital. Using an overlapping generations framework with finite-lived households we analyze the relevance of government expenditure on health and education to counter such growth-reducing forces. We focus on three different models that differ with respect to the mode of financing of education: (i) both private and public spending, (ii) only public spending, and (iii) only private spending. Results show that models (i) and (iii) outperform model (ii) with respect to long-term growth rates of per capita income, welfare levels and other important macroeconomic indicators. Theoretical predictions of model rankings for these macroeconomic indicators are also supported by observed stylized facts.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Macroeconomics.
Volume (Year): 30 (2008)
Issue (Month): 4 (December)
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Web page: http://www.elsevier.com/locate/inca/622617
Health Life expectancy Human capital Public spending Endogenous growth;
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