Health, Growth and Welfare: Why Put Public Money on Medical R&D?
This paper aims at providing a simple economic framework to address a somewhat neglected question of economic policy, namely the optimal share of investments in medical R&D in total public spending. In or- der to capture the long-run impact of tax-financed medical R&D on the growth rate, we develop an endogenous growth model in the spirit of Barro . The model focuses on the optimal sharing of public re- sources between consumption and (non-health) investment, medical R&D and other health expenditures. It emphasizes the key role played by the public health-related R&D in enhancing economic growth and welfare in the long run. According to our numerical simulations - based on pru- dential assumptions about the economic impact of medical R&D - a one billion euros permanent reallocation of public spending in favor of medical R&D, would induce about €4 billions GDP increase the first year and a GDP discounted benefit of about €60 billions over a decade. Then, in economies characterized by productive externalities of R&D, the govern- ment is recommended to invest substantially more in medical R&D in order to implement an optimal policy.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: 4, bld Francois Mitterand, 91025 Evry Cedex|
Phone: +33 1 69 47 71 77
Fax: +33 1 69 47 70 50
Web page: http://epee.univ-evry.fr
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stephen Turnovsky, 1998.
"Fiscal Policy, Elastic Labor Supply, and Endogenous Growth,"
Discussion Papers in Economics at the University of Washington
0068, Department of Economics at the University of Washington.
- Turnovsky, Stephen J., 2000. "Fiscal policy, elastic labor supply, and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 185-210, February.
- Stephen Turnovsky, 1998. "Fiscal Policy, Elastic Labor Supply, and Endogenous Growth," Working Papers 0068, University of Washington, Department of Economics.
- Romer, Paul M, 1990.
"Endogenous Technological Change,"
Journal of Political Economy,
University of Chicago Press, vol. 98(5), pages S71-102, October.
- Bloom, David E. & Canning, David & Sevilla, Jaypee, 2004. "The Effect of Health on Economic Growth: A Production Function Approach," World Development, Elsevier, vol. 32(1), pages 1-13, January.
- Andres Erosa & Tatyana Koreshkova & Diego Restuccia, 2006. "On the aggregate and distributional implications of productivity differences across countries," Working Paper 06-02, Federal Reserve Bank of Richmond.
- Ananth Seshadri & Rodolfo Manuelli, 2005. "Human Capital and the Wealth of Nations," 2005 Meeting Papers 56, Society for Economic Dynamics.
- Maria Arrazola & Jose de Hevia, 2004. "More on the estimation of the human capital depreciation rate," Applied Economics Letters, Taylor & Francis Journals, vol. 11(3), pages 145-148.
- Robert J. Barro, 1995.
"Inflation and Economic Growth,"
NBER Working Papers
5326, National Bureau of Economic Research, Inc.
- Barro, Robert J., 1990.
"Government Spending in a Simple Model of Endogeneous Growth,"
3451296, Harvard University Department of Economics.
- 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 S103-26, October.
- Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
- Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
- P R Agénor, 2005.
"Health and Infrastructure in Models of Endogenous Growth,"
Centre for Growth and Business Cycle Research Discussion Paper Series
62, Economics, The Univeristy of Manchester.
- Pierre-Richard Agénor, 2005. "Health and Infrastructure in Models of Endogenous Growth," The School of Economics Discussion Paper Series 0539, Economics, The University of Manchester.
- Charles I. Jones, 2007. "The Weak Link Theory of Economic Development," Working Papers 042007, Hong Kong Institute for Monetary Research.
- Nikos Benos, 2005. "Fiscal Policy and Economic Growth: Empirical Evidence from OECD," University of Cyprus Working Papers in Economics 1-2005, University of Cyprus Department of Economics.
- N. Gregory Mankiw & David Romer & David N. Weil, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(2), pages 407-437.
- María Arrazola & José de Hevia & Marta Risueño & José Félix Sanz Sanz, 2005. "A proposal to estimate human capital depreciation: some evidence for Spain," Hacienda Pública Española, IEF, vol. 172(1), pages 9-22, June.
- Zon A.H. van & Muysken J., 1997. "Health, education and endogenous growth," Research Memorandum 006, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
- van Zon, Adriaan & Muysken, Joan, 2001. "Health and endogenous growth," Journal of Health Economics, Elsevier, vol. 20(2), pages 169-185, March.
When requesting a correction, please mention this item's handle: RePEc:eve:wpaper:08-18. 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: (Samuel Nosel)
If references are entirely missing, you can add them using this form.