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Growth and welfare effects of health care in knowledge based economies

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  • Kuhn, Michael
  • Prettner, Klaus

Abstract

We study the effects of a labor-intensive health care sector within an R&D-driven growth model with overlapping generations. Health care increases longevity and labor participation/productivity. We examine under which conditions expanding health care enhances growth and welfare. Even if the provision of health care diverts labor from productive activities, it may still fuel R&D and economic growth if the additional wealth that comes with expanding longevity translates into a more capital/machine- intensive final goods production and, thereby, raises the return to developing new machines. We establish mild conditions under which an expansion of health care beyond the growth-maximizing level is Pareto-improving. --

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Paper provided by Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON) in its series ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy with number 03/2012.

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Date of creation: 2012
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Handle: RePEc:zbw:tuweco:032012

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Web page: http://www.econ.tuwien.ac.at/
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Keywords: endogenous growth; mortality; (Blanchard) overlapping generations; health care; research and development; sectoral composition;

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Cited by:
  1. Gustav Feichtinger & Alexia Prskawetz & Andrea Seidl & Christa Simon & Stefan Wrzaczek, 2013. "Do Egalitarian Societies Boost Fertility?," Working Papers, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna 1302, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  2. Maria Rita Testa & Stuart Basten, 2012. "Have Lifetime Fertility Intentions Declined During the “Great Recession”?," Working Papers, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna 1209, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.

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