Public and Private Expenditures on Health in a Growth Model
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.
|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|
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