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

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Author Info
Sergio Beraldo
Daniel Montolio Estivill
Gilberto Turati (Universitat de Barcelona)

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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.

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Publisher Info
Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 127.

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Length: 31 pages
Date of creation: 2005
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Handle: RePEc:bar:bedcje:2005127

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Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
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Find related papers by JEL classification:
I38 - Health, Education, and Welfare - - Welfare 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, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marc Suhrcke & Dieter M. Urban, 2006. "Are Cardiovascular Diseases Bad for Economic Growth?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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