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Advancing Medical Technology, Aging Population, and Economic Growth

  • Gilad Sorek

Endogenous accumulation of human capital increases labor productivity and promotes technological progress in the medical industry. Technological progress lowers the relative price of health services. The rising income and decreasing price of health services allow the elderly to prolong their life expectancy by using increasing amounts of healthcare services—but not necessarily by consuming a larger share of healthcare expenditure. As adults invest more in their human capital, they bear fewer children. Thus, the aging of the population is two-tailed. We characterize the optimal heath tax rate, and analyze the affects of suboptimal taxation on the dynamics of growth and aging.

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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c011_046.

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Length: 48 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:deg:conpap:c011_046
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