IDEAS home Printed from https://ideas.repec.org/a/cuf/journl/y2010v11i1p139-153.html
   My bibliography  Save this article

Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting

Author

Listed:
  • Rangan Gupta

    (University of Pretoria, Department of Economics)

  • Cobus Vermeulen

    (University of Pretoria, Department of Economics)

Abstract

This paper develops a monetary endogenous growth overlapping generations model characterized by endogenous longevity and an inflation targeting monetary authority, and analyzes the growth dynamics that emerges from this framework. Besides the endogenous longevity which depends on the complimentarity of private and public health expenditures, the growth process is endogenized by allowing for a productive role of government expenditure on infrastructure. Following the huge existing literature, money is introduced by assuming that banks are obligated to hold a fraction of the deposits as cash reserve requirements. Given this framework, we show that multiple equilibria emerges, with the low-growth (high-growth) equilibrium being unstable (stable) and locally determinate (locally indeterminate). In addition, we show that, under certain conditions, endogenous fluctuations and even chaos could emerge around the high-growth equilibrium.

Suggested Citation

  • Rangan Gupta & Cobus Vermeulen, 2010. "Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting," Annals of Economics and Finance, Society for AEF, vol. 11(1), pages 139-153, May.
  • Handle: RePEc:cuf:journl:y:2010:v:11:i:1:p:139-153
    as

    Download full text from publisher

    File URL: http://www.aeconf.net/Articles/May2010/aef110105.pdf
    Download Restriction: no

    File URL: http://down.aefweb.net/AefArticles/aef110105.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Matteo Cervellati & Uwe Sunde, 2005. "Human Capital Formation, Life Expectancy, and the Process of Development," American Economic Review, American Economic Association, pages 1653-1672.
    2. 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.
    3. Helle Bunzel & Xue Qiao, 2005. "Endogenous lifetime and economic growth revisited," Economics Bulletin, AccessEcon, vol. 15(8), pages 1-8.
    4. Shankha Chakraborty, 2002. "Endogenous Lifetime and Economic Growth," University of Oregon Economics Department Working Papers 2002-03, University of Oregon Economics Department, revised 26 Jan 2002.
    5. Sarkar, Jayanta, 2007. "Growth dynamics in a model of endogenous time preference," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 528-542.
    6. Osang, Thomas & Sarkar, Jayanta, 2005. "Endogenous Mortality, Human Capital and Endogenous Growth," Departmental Working Papers 0511, Southern Methodist University, Department of Economics.
    7. Rangan Gupta, 2011. "Currency Substitution and Financial Repression," International Economic Journal, Taylor & Francis Journals, pages 47-61.
    8. Pierre-Richard Agénor, 2015. "Public capital, health persistence and poverty traps," Journal of Economics, Springer, pages 103-131.
    9. Rangan Gupta, 2009. "Tax evasion and financial repression: a reconsideration using endogenous growth models," Journal of Economic Studies, Emerald Group Publishing, vol. 36(6), pages 660-674, October.
    10. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    11. Rangan Gupta, 2011. "Currency Substitution and Financial Repression," International Economic Journal, Taylor & Francis Journals, pages 47-61.
    12. Kam Ki Tang & Jie Zhang, 2007. "Health, Education, And Life Cycle Savings In The Development Process," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 615-630, July.
    13. Hazan, Moshe & Zoabi, Hosny, 2005. "Does Longevity Cause Growth?," CEPR Discussion Papers 4931, C.E.P.R. Discussion Papers.
    14. Agénor, Pierre-Richard, 2010. "A theory of infrastructure-led development," Journal of Economic Dynamics and Control, Elsevier, pages 932-950.
    15. Diamond, Peter & Yellin, Joel, 1990. "Inventories and Money Holdings in a Search Economy," Econometrica, Econometric Society, vol. 58(4), pages 929-950, July.
    16. Rangan Gupta, 2005. "Costly State Monitoring and Reserve Requirements," Annals of Economics and Finance, Society for AEF, vol. 6(2), pages 263-288, November.
    17. Gupta, Rangan, 2008. "Tax evasion and financial repression," Journal of Economics and Business, Elsevier, pages 517-535.
    18. Rangan Gupta & Emmanuel Ziramba, 2008. "Costly Tax Enforcement and Financial Repression," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 37(2), pages 141-154, July.
    19. Aisa, Rosa & Pueyo, Fernando, 2006. "Government health spending and growth in a model of endogenous longevity," Economics Letters, Elsevier, vol. 90(2), pages 249-253, February.
    20. Busetti, Fabio & Taylor, A.M. Robert, 2005. "Stationarity Tests For Irregularly Spaced Observations And The Effects Of Sampling Frequency On Power," Econometric Theory, Cambridge University Press, pages 757-794.
    21. 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 103-126, October.
    22. Andres, Javier & Domenech, Rafael & Fatas, Antonio, 2008. "The stabilizing role of government size," Journal of Economic Dynamics and Control, Elsevier, pages 571-593.
    23. Pierre-Richard Agénor, 2006. "A Theory of Infrastructure-led Development," The School of Economics Discussion Paper Series 0640, Economics, The University of Manchester.
    24. Sebnem Kalemli-Ozcan, 2008. "The uncertain lifetime and the timing of human capital investment," Journal of Population Economics, Springer;European Society for Population Economics, pages 557-572.
    25. Been-Lon Chen & Yeong-Yuh Chiang & Ping Wang, 2008. "Credit Market Imperfections and Long-Run Macroeconomic Consequences," Annals of Economics and Finance, Society for AEF, vol. 9(1), pages 151-175, May.
    26. Amparo Castelló-Climent & Rafael Doménech, 2008. "Human Capital Inequality, Life Expectancy And Economic Growth," Economic Journal, Royal Economic Society, vol. 118(528), pages 653-677, April.
    27. Kalemli-Ozcan, Sebnem, 2003. "A stochastic model of mortality, fertility, and human capital investment," Journal of Development Economics, Elsevier, pages 103-118.
    28. Rangan Gupta & Emmanuel Ziramba, 2008. "Openness, Bureaucratic Corruption and Public Policy in an Endogenous Growth Model," Working Papers 200817, University of Pretoria, Department of Economics.
    29. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
    30. Jayanta Sarkar, 2008. "Mortality, Fertility, and Persistent Income Inequality," Southern Economic Journal, Southern Economic Association, vol. 75(2), pages 332-350, October.
    31. Blackburn, Keith & Cipriani, Giam Pietro, 2002. "A model of longevity, fertility and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 187-204, February.
    32. Jocelyn E. Finlay, 2006. "Endogenous Longevity and Economic Growth," PGDA Working Papers 0706, Program on the Global Demography of Aging.
    33. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers Archive 12378, Iowa State University, Department of Economics.
    34. Kalemli-Ozcan, Sebnem, 2002. "Does the Mortality Decline Promote Economic Growth?," Journal of Economic Growth, Springer, vol. 7(4), pages 411-439, December.
    35. Gupta, Rangan, 2008. "Tax evasion and financial repression," Journal of Economics and Business, Elsevier, pages 517-535.
    36. Ken-ichi Hashimoto & Ken Tabata, 2005. "Health Infrastructure, Demographic Transition and Growth," Review of Development Economics, Wiley Blackwell, vol. 9(4), pages 549-562, November.
    37. repec:ebl:ecbull:v:15:y:2005:i:8:p:1-8 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Chan, 2012. "A very preliminary survey on growth and development," MPRA Paper 39037, University Library of Munich, Germany.
    2. Rangan Gupta & Lardo Stander, 2014. "Endogenous Fluctuations in an Endogenous Growth Model with Inflation Targeting," Working Papers 201432, University of Pretoria, Department of Economics.
    3. repec:ipg:wpaper:2014-461 is not listed on IDEAS
    4. Shuyun May Li, Solmaz Moslehi, Siew Ling Yew, 2012. "Public-Private Mix of Health Expenditure: A Political Economy Approach and A Quantitative Exercise," Department of Economics - Working Papers Series 1157, The University of Melbourne.

    More about this item

    Keywords

    Indeterminacy; Inflation targeting; Longevity; Multiple equilibria; Overlapping generations; Public health;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cuf:journl:y:2010:v:11:i:1:p:139-153. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qiang Gao). General contact details of provider: http://edirc.repec.org/data/emcufcn.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.