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Public and Private Expenditures on Health in a Growth Model

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  • Bhattacharya, Joydeep
  • Qiao, Xue

Abstract

This paper introduces endogenous longevity in an otherwise standard overlapping generations model with capital. In the model, a young agent may increase the length of her old age by incurring investments in health funded from her wage income. Such private health investments are assumed to be more "productive" if accompanied by complementary tax-financed public health programs. The presence of such a complementary public input in private longevity is shown to expose the economy to aggregate endogenous fluctuations and even chaos, and such volatility is impossible in its absence. In particular, the model is capable of generating dramatic reversals in life expectancy as has been observed in many countries.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p1838-2005-06-01.pdf
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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12378.

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Date of creation: 01 Jun 2005
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Publication status: Published in Journal of Economic Dynamics and Control, August 2007, vol. 31 no. 8, pp. 2519-2535
Handle: RePEc:isu:genres:12378

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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Keywords: chaos; longevity; public health;

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References

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  1. repec:rus:hseeco:71105 is not listed on IDEAS
  2. Jocelyn E. Finlay, 2006. "Endogenous Longevity and Economic Growth," PGDA Working Papers, Program on the Global Demography of Aging 0706, Program on the Global Demography of Aging.
  3. Shankha Chakraborty, 2002. "Endogenous Lifetime and Economic Growth," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2002-03, University of Oregon Economics Department, revised 26 Jan 2002.
  4. Mitra, Tapan, 2001. "A Sufficient Condition for Topological Chaos with an Application to a Model of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 133-152, January.
  5. Haaparanta, Pertti & Puhakka, Mikko, 2004. "Endogenous time preference, investment and development traps," BOFIT Discussion Papers 4/2004, Bank of Finland, Institute for Economies in Transition.
  6. Shankha Chakraborty & Mausumi Das, 2003. "Mortality, Human Capital and Persistent Inequality," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2003-11, University of Oregon Economics Department.
  7. Robert E. Hall & Charles I. Jones, 2004. "The Value of Life and the Rise in Health Spending," NBER Working Papers 10737, National Bureau of Economic Research, Inc.
  8. Dranove, David, 1998. "Is there underinvestment in R & D about prevention?," Journal of Health Economics, Elsevier, vol. 17(1), pages 117-127, January.
  9. Liu, Liqun & Neilson, William S., 2005. "Endogenous private health investment and the willingness to pay for public health projects: The effects of income," Economics Letters, Elsevier, vol. 87(3), pages 415-420, June.
  10. repec:ebl:ecbull:v:9:y:2004:i:3:p:1-10 is not listed on IDEAS
  11. Tomas J. Philipson & William H. Dow & Xavier Sala-i-Martin, 1999. "Longevity Complementarities under Competing Risks," American Economic Review, American Economic Association, vol. 89(5), pages 1358-1371, December.
  12. Rosa AĆ­sa & Fernando Pueyo, 2004. "Endogenous longevity, health and economic growth: a slow growth for a longer life?," Economics Bulletin, AccessEcon, vol. 9(3), pages 1-10.
  13. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 93(4), pages 541-62, November.
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