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Public and Private Expenditures on Health in a Growth Model

  • Bhattacharya, Joydeep
  • Qiao, Xue

This paper introduces endogenous longevity in an otherwise standard overlapping generations model with capital. In the model, a young agent may increase the length of her old age by incurring investments in health funded from her wage income. Such private health investments are assumed to be more "productive" if accompanied by complementary tax-financed public health programs. The presence of such a complementary public input in private longevity is shown to expose the economy to aggregate endogenous fluctuations and even chaos, and such volatility is impossible in its absence. In particular, the model is capable of generating dramatic reversals in life expectancy as has been observed in many countries.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers Archive with number 12378.

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Date of creation: 01 Jun 2005
Date of revision:
Publication status: Published in Journal of Economic Dynamics and Control, August 2007, vol. 31 no. 8, pp. 2519-2535
Handle: RePEc:isu:genres:12378
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Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070

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  1. repec:ebl:ecbull:v:9:y:2004:i:3:p:1-10 is not listed on IDEAS
  2. Shankha Chakraborty & Mausumi Das, 2004. "Mortality, Human Capital and Persistent Inequality," Econometric Society 2004 North American Summer Meetings 100, Econometric Society.
  3. Haaparanta, Pertti & Puhakka, Mikko, 2004. "Endogenous time preference, investment and development traps," BOFIT Discussion Papers 4/2004, Bank of Finland, Institute for Economies in Transition.
  4. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  5. Robert E. Hall & Charles I. Jones, 2004. "The Value of Life and the Rise in Health Spending," NBER Working Papers 10737, National Bureau of Economic Research, Inc.
  6. repec:gdm:wpaper:0706 is not listed on IDEAS
  7. Dranove, David, 1998. "Is there underinvestment in R & D about prevention?," Journal of Health Economics, Elsevier, vol. 17(1), pages 117-127, January.
  8. Mitra, Tapan, 2001. "A Sufficient Condition for Topological Chaos with an Application to a Model of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 133-152, January.
  9. Liu, Liqun & Neilson, William S., 2005. "Endogenous private health investment and the willingness to pay for public health projects: The effects of income," Economics Letters, Elsevier, vol. 87(3), pages 415-420, June.
  10. repec:rus:hseeco:71105 is not listed on IDEAS
  11. Steven Shavell, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 541-562.
  12. Rosa AĆ­sa & Fernando Pueyo, 2004. "Endogenous longevity, health and economic growth: a slow growth for a longer life?," Economics Bulletin, AccessEcon, vol. 9(3), pages 1-10.
  13. Tomas J. Philipson & William H. Dow & Xavier Sala-i-Martin, 1999. "Longevity Complementarities under Competing Risks," American Economic Review, American Economic Association, vol. 89(5), pages 1358-1371, December.
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