Escaping The Health-Poverty Trap: Public Health Investment And Economic Development

We construct an endogenous growth model that addresses overpopulation and human capital deficiencies by incorporating public health into household intertemporal decision-making. In this framework, public health investments reduce infant mortality, lower fertility, and stimulate private investment in child quality through a quantity-quality trade-off, thereby accelerating long-term growth. Our main contribution is demonstrating that government policy can independently trigger a demographic transition without relying on autonomous income or technology shocks. Through numerical simulations and historical illustrations from the United Kingdom, United States, and China, we illustrate this theoretical mechanism, showing that public health improvement is a critical prerequisite for escaping the Health-Poverty Trap. Crucially, our simulation results reveal a non-linear policy threshold: while intermediate tax rates successfully finance public health and kick-start sustainable growth, extreme tax regimes fail to incentivize human capital accumulation. Prioritizing public health spending within an optimal range is thus a vital modern policy imperative.