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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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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p1838-2005-06-01.pdf
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers 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
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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  1. Shankha Chakraborty & Mausumi Das, 2003. "Mortality, Human Capital and Persistent Inequality," Working papers 119, Centre for Development Economics, Delhi School of Economics.
  2. 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.
  3. 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.
  4. Jocelyn E. Finlay, 2006. "Endogenous Longevity and Economic Growth," PGDA Working Papers 0706, Program on the Global Demography of Aging.
  5. 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.
  6. repec:rus:hseeco:71105 is not listed on IDEAS
  7. 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.
  8. Robert E. Hall & Charles I. Jones, 2005. "The value of life and the rise in health spending," Proceedings, Federal Reserve Bank of San Francisco.
  9. Dranove, David, 1998. "Is there underinvestment in R & D about prevention?," Journal of Health Economics, Elsevier, vol. 17(1), pages 117-127, January.
  10. 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.
  11. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  12. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 541-62, November.
  13. repec:ebl:ecbull:v:9:y:2004:i:3:p:1-10 is not listed on IDEAS
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