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Growth and Welfare under Endogenous Lifetime

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  • Maik T. Schneider
  • Ralph Winkler

Abstract

We 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 Info

Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp1013.

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Date of creation: Sep 2010
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Handle: RePEc:ube:dpvwib:dp1013

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Related research

Keywords: economic growth; endogenous longevity; healthcare expenditures; healthcare technology; quality-quantity trade-off;

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Cited by:
  1. Klaus Prettner, 2009. "Population ageing and endogenous economic growth," Working Papers 0908, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  2. Michael Kuhn & Klaus Prettner, 2012. "Growth and welfare e ffects of health care in knowledge based economies," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 120, Courant Research Centre PEG.
  3. Andersen, Torben M & Bhattacharya, Joydeep, 2012. "A Dynamic Efficiency Rationale for Public Investment in the Health of the Young," Staff General Research Papers 35503, Iowa State University, Department of Economics.

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