Population Aging and Economic Growth: the effect of health expenditure
AbstractRising longevity has led to population aging in developed countries, causing increasing concerns about its economic impact. Specially, the trend of population aging increases health expenditure in developed countries, and 70% to 80% of health expenditure is funded by public sector. Therefore, this paper focuses on the health demand in an aging economy and examines how the aging of the population and public health funding (PHF) affects agents' behavior. For this purpose, we construct a simple growth model and examine the e®ect of aging and PHF on saving and the growth rate. We show that an increase in life expectancy increases the growth rate in the economy without PHF, but that it has an inverted U-shaped relation in the economy with PHF. From the welfare standpoint, we show that it increases the intergenerational conflict between current and future generation and that PHF has the result of alleviating the conflict.
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Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2008/35.
Date of creation: 2008
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More information through EDIRC
life expectancy; household production; economic growth; social welfare;
Find related papers by JEL classification:
- I10 - Health, Education, and Welfare - - Health - - - General
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-AGE-2008-12-14 (Economics of Ageing)
- NEP-ALL-2008-12-14 (All new papers)
- NEP-HAP-2008-12-14 (Economics of Happiness)
- NEP-HEA-2008-12-14 (Health Economics)
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