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Public health spending, old-age productivity and economic growth: Chaotic cycles under perfect foresight

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  • Fanti, Luciano
  • Gori, Luca

Abstract

This paper analyses the dynamics of a double Cobb–Douglas economy with overlapping generations and public health investments that affect the supply of efficient labour of the old-aged. It is shown that the positive steady state of the economy is unique. Moreover, we provide necessary and sufficient conditions for the emergence of endogenous deterministic complex cycles when individuals are perfectly foresighted. Interestingly, (i) the equilibrium dynamics shows rather complicated phenomena such as a multiplicity of bubblings depending on the size of the public health system, and (ii) the higher the degree of thriftiness, the likelier an economy is exposed to endogenous fluctuations because the need to save when young to support consumption when old is reduced.

Suggested Citation

  • Fanti, Luciano & Gori, Luca, 2011. "Public health spending, old-age productivity and economic growth: Chaotic cycles under perfect foresight," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1), pages 137-151.
  • Handle: RePEc:eee:jeborg:v:78:y:2011:i:1:p:137-151
    DOI: 10.1016/j.jebo.2010.12.014
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    Cited by:

    1. Potrafke, Niklas, 2010. "The growth of public health expenditures in OECD countries: Do government ideology and electoral motives matter?," Journal of Health Economics, Elsevier, vol. 29(6), pages 797-810, December.
    2. Wei-Bin Zhang, 2014. "Endogenous population with human and physical capital accumulation," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(3), pages 231-252, September.
    3. Nathalie Mathieu-Bolh & Xavier Pautrel, 2014. "Environmental taxation, health and the life-cycle," Working Papers hal-00990256, HAL.
    4. Paolo Melindi-Ghidi & Willem Sas, 2015. "Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy," Working Papers halshs-01171701, HAL.
    5. Raffin, Natacha & Seegmuller, Thomas, 2014. "Longevity, pollution and growth," Mathematical Social Sciences, Elsevier, vol. 69(C), pages 22-33.
    6. Wei-Bin, ZHANG, 2015. "Economic Oscillations With Endogenous Population, Human Capital And Wealth," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 6(2), pages 9-26.
    7. Luca Gori & Mauro Sodini, 2011. "Nonlinear Dynamics in an OLG Growth Model with Young and Old Age Labour Supply: The Role of Public Health Expenditure," Computational Economics, Springer;Society for Computational Economics, vol. 38(3), pages 261-275, October.
    8. Dimitrios Varvarigos, 2013. "Endogenous Cycles and Human Capital," Discussion Papers in Economics 13/18, Department of Economics, University of Leicester.

    More about this item

    Keywords

    Old-age labour productivity; OLG model; Perfect foresight; Public health expenditure;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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