Growth and Welfare under Endogenous Lifetime
AbstractWe develop a perpetual youth model to investigate how longevity affects economic growth and welfare. Life expectancy is determined by individuals’ investments in healthcare. We find that improvements in the healthcare technology always increase the steady state growth rate. Although the effect is small, even for large increases in longevity, welfare gains may be substantial depending on the type of the technological improvement. We identify two externalities associated with healthcare investments and provide a condition when healthcare expenditures are inefficiently low in the market equilibrium. Finally, we discuss our results with respect to alternative spillover specifications in the production sector.
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Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 10/137.
Length: 43 pages
Date of creation: Sep 2010
Date of revision:
economic growth; endogenous longevity; healthcare expenditures; healthcare technology; quality-quantity trade-off;
Other versions of this item:
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- I10 - Health, Education, and Welfare - - Health - - - General
- J10 - Labor and Demographic Economics - - Demographic Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-09 (All new papers)
- NEP-DGE-2010-10-09 (Dynamic General Equilibrium)
- NEP-FDG-2010-10-09 (Financial Development & Growth)
- NEP-HEA-2010-10-09 (Health Economics)
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