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Health and Infrastructure in Models of Endogenous Growth

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  • P R Agénor

Abstract

This paper studies the optimal allocation of government spending between infrastructure and health (which affects labor productivity as well as household utility) in an endogenous growth framework. A key feature of the model is that infrastructure affects not only the production of goods but also the supply of health services. The first part considers the case where health enters as a flow in production and utility, whereas the second focuses on a "stock" approach. Growth- and utility-maximizing rules for output taxation and the allocation of public spending are derived. It is shown, in particular, that the welfare-maximizing share of spending on health exceeds the growth-maximizing share.

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File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/cgbcr/discussionpapers/dpcgbcr62.pdf
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Bibliographic Info

Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 62.

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Length: 37 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:man:cgbcrp:62

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  1. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  2. Lavy, Victor & Strauss, John & Thomas, Duncan & de Vreyer, Philippe, 1996. "Quality of health care, survival and health outcomes in Ghana," Journal of Health Economics, Elsevier, vol. 15(3), pages 333-357, June.
  3. P R Agénor, 2005. "Infrastructure, Public Education and Growth with Congestion Costs," Centre for Growth and Business Cycle Research Discussion Paper Series 47, Economics, The Univeristy of Manchester.
  4. Knowles, Stephen & Owen, P Dorian, 1997. "Education and Health in an Effective-Labour Empirical Growth Model," The Economic Record, The Economic Society of Australia, vol. 73(223), pages 314-28, December.
  5. Martin Zagler & Georg Dürnecker, 2003. "Fiscal Policy and Economic Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 397-418, 07.
  6. Chakrabarty Debajyoti, 2012. "Poverty Traps and Growth in a Model of Endogenous Time Preference," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-35, July.
  7. Corrigan, Paul & Glomm, Gerhard & Mendez, Fabio, 2005. "AIDS crisis and growth," Journal of Development Economics, Elsevier, vol. 77(1), pages 107-124, June.
  8. Behrman, Jere R. & Wolfe, Barbara L., 1987. "How does mother's schooling affect family health, nutrition, medical care usage, and household sanitation?," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 185-204.
  9. David N. Weil, 2005. "Accounting for the Effect of Health on Economic Growth," NBER Working Papers 11455, National Bureau of Economic Research, Inc.
  10. Gyimah-Brempong, Kwabena & Wilson, Mark, 2004. "Health human capital and economic growth in Sub-Saharan African and OECD countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(2), pages 296-320, May.
  11. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
  12. Behrman, Jere R, 1996. "The Impact of Health and Nutrition on Education," World Bank Research Observer, World Bank Group, vol. 11(1), pages 23-37, February.
  13. Rodrigo R. Soares, 2003. "Mortality Reductions, Educational Attainment, and Fertility Choice," Development and Comp Systems 0312006, EconWPA.
  14. Bloom, David E. & Canning, David & Sevilla, Jaypee, 2004. "The Effect of Health on Economic Growth: A Production Function Approach," World Development, Elsevier, vol. 32(1), pages 1-13, January.
  15. Marianne Fay & Danny Leipziger & Quentin Wodon & Tito Yepes, 2003. "Achieving the Millennium Development Goals : The role of infrastructure," Policy Research Working Paper Series 3163, The World Bank.
  16. Lee, Lung-fei & Rosenzweig, Mark R. & Pitt, Mark M., 1997. "The effects of improved nutrition, sanitation, and water quality on child health in high-mortality populations," Journal of Econometrics, Elsevier, vol. 77(1), pages 209-235, March.
  17. Turnovsky, Stephen J., 1996. "Optimal tax, debt, and expenditure policies in a growing economy," Journal of Public Economics, Elsevier, vol. 60(1), pages 21-44, April.
  18. Giancarlo Corsetti & Nouriel Roubini, 1996. "Optimal Government Spending and Taxation in Endgenous Growth Models," NBER Working Papers 5851, National Bureau of Economic Research, Inc.
  19. repec:rus:hseeco:70719 is not listed on IDEAS
  20. Nikos Benos, 2005. "Fiscal Policy and Economic Growth: Empirical Evidence from OECD," University of Cyprus Working Papers in Economics 1-2005, University of Cyprus Department of Economics.
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Citations

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Cited by:
  1. Misch, Florian & Gemmell, Norman & Kneller, Richard, 2011. "Growth and welfare maximization in models of public finance and endogenous growth," ZEW Discussion Papers 11-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Agénor, Pierre-Richard, 2010. "A theory of infrastructure-led development," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 932-950, May.
  3. Pierre-Richard Agénor, 2005. "Infrastructure, Public Education and Growth with Congestion Costs," The School of Economics Discussion Paper Series 0524, Economics, The University of Manchester.
  4. Pierre-Richard Agénor, 2006. "A Theory of Infrastructure-led Development," The School of Economics Discussion Paper Series 0640, Economics, The University of Manchester.
  5. Pierre-Richard Agénor & Kyriakos C. Neanidis, 2007. "Optimal Taxation and Growth with Public Goods and Costly Enforcement," Centre for Growth and Business Cycle Research Discussion Paper Series 89, Economics, The Univeristy of Manchester.
  6. Agenor, Pierre-Richard & Moreno-Dodson, Blanca, 2006. "Public infrastructure and growth : new channels and policy implications," Policy Research Working Paper Series 4064, The World Bank.
  7. Stefano Bosi & Thierry Laurent, 2008. "Health, Growth and Welfare: Why Put Public Money on Medical R&D?," Documents de recherche 08-18, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  8. Suhrcke, Marc & Pelgrin, Florian & Oliveira Martins, Joaquim & Dormont, Brigitte, 2007. "Health expenditures, longevity and growth," Economics Papers from University Paris Dauphine 123456789/3882, Paris Dauphine University.

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