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Endogenous mortality, human capital and economic growth

  • Osang, Thomas
  • Sarkar, Jayanta

We consider growth and welfare effects of lifetime-uncertainty in an economy with human capital-led endogenous growth. We argue that lifetime uncertainty reduces private incentives to invest in both physical and human capital. Using an overlapping generations framework with finite-lived households we analyze the relevance of government expenditure on health and education to counter such growth-reducing forces. We focus on three different models that differ with respect to the mode of financing of education: (i) both private and public spending, (ii) only public spending, and (iii) only private spending. Results show that models (i) and (iii) outperform model (ii) with respect to long-term growth rates of per capita income, welfare levels and other important macroeconomic indicators. Theoretical predictions of model rankings for these macroeconomic indicators are also supported by observed stylized facts.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 4 (December)
Pages: 1423-1445

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:4:p:1423-1445
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
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  8. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
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  13. Michele Boldrin, 1992. "Public Education and Capital Accumulation," Discussion Papers 1017, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Lakshmi K. Raut, 2003. "Long Term Effects of Preschool Investment on school Performance and Labor Market Outcome," Labor and Demography 0307002, EconWPA.
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