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Healthy, Educated and Wealthy: Is the Welfare State Really Harmful for Growth?

Author

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  • Sergio Beraldo
  • Daniel Montolio Estivill
  • Gilberto Turati

    (Universitat de Barcelona)

Abstract

In this paper, we study how public and private expenditures in health and education affect economic growth by their influence on peoples health, abilities, skills and knowledge. We consider a growth accounting framework in order to test whether welfare expenditures more than offset the efficiency losses caused by distortionary taxation, and whether the effects of public expenditure on economic growth differ from those of private expenditure. Our empirical analysis is based on a panel of 19 OECD countries observed between 1971 and 1998. The results are consistent with the hypothesis that the contribution of welfare expenditures more than compensates for the distortions caused by the tax system; and the estimated positive impact is stronger for health than for education. We also find some evidence that public expenditure influences GDP growth more than private expenditure.

Suggested Citation

  • Sergio Beraldo & Daniel Montolio Estivill & Gilberto Turati, 2005. "Healthy, Educated and Wealthy: Is the Welfare State Really Harmful for Growth?," Working Papers in Economics 127, Universitat de Barcelona. Espai de Recerca en Economia.
    • Handle: RePEc:bar:bedcje:2005127
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    Cited by:

    1. Nadide Halıcı-Tülüce & İbrahim Doğan & Cüneyt Dumrul, 2016. "Is income relevant for health expenditure and economic growth nexus?," International Journal of Health Economics and Management, Springer, vol. 16(1), pages 23-49, March.
    2. Facchini, François & Seghezza, Elena, 2018. "Public spending structure, minimal state and economic growth in France (1870–2010)," Economic Modelling, Elsevier, vol. 72(C), pages 151-164.
    3. Beraldo, Sergio & Montolio, Daniel & Turati, Gilberto, 2009. "Healthy, educated and wealthy: A primer on the impact of public and private welfare expenditures on economic growth," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(6), pages 946-956, December.
    4. Marc Suhrcke & Dieter Urban, 2010. "Are cardiovascular diseases bad for economic growth?," Health Economics, John Wiley & Sons, Ltd., vol. 19(12), pages 1478-1496, December.
    5. Robyn Swift, 2011. "The relationship between health and GDP in OECD countries in the very long run," Health Economics, John Wiley & Sons, Ltd., vol. 20(3), pages 306-322, March.
    6. Daniela Sonedda & Gilberto Turati, 2005. "Winners and Losers in the Italian Welfare State: A Microsimulation Analysis of Income Redistribution Considering In-Kind Transfers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 423-464, December.
    7. Awaworyi Churchill, Sefa & Yew, Siew Ling & Ugur, Mehmet, 2015. "Effects of Government Education and Health Expenditures on Economic Growth: A Meta-analysis," EconStor Preprints 110901, ZBW - Leibniz Information Centre for Economics.
    8. repec:dau:papers:123456789/7972 is not listed on IDEAS
    9. MESSAILI, Moussa & KAID TLILANE, Nouara, 2018. "Essai d’évaluation de la contribution de la santé à la croissance économique en Algérie [An assessment of the contribution of health to economic growth in Algeria]," MPRA Paper 88013, University Library of Munich, Germany, revised 18 Jul 2018.

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    More about this item

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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