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Endogenous Mortality, Human Capital and Endogenous Growth

  • Osang, Thomas


    (Department of Economics, Southern Methodist University)

  • Sarkar, Jayanta


    (Department of Economics, Southern Methodist University)

We consider growth and welfare effects of lifetime-uncertainty in an economy with human capital-led endogenous growth. We argue that lifetime uncertainty reduces private incentives to invest in both physical and human capital. Using an overlapping generations framework with finite-lived households we analyze the relevance of government expenditure on health and education to counter such growth-reducing forces. We focus on three different models that differ with respect to the mode of financing of education: (i) both private and public spending, (ii) only public spending, and (iii) only private spending. Results show that models (i) and (iii) outperform model (ii) with respect to long-term growth rates of per capita income, welfare levels and other important macroeconomic indicators. Theoretical predictions of model rankings for these macroeconomic indicators are also supported by observed stylized facts.

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Paper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 0511.

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Length: 41 pages
Date of creation: 01 Sep 2005
Date of revision:
Handle: RePEc:smu:ecowpa:0511
Contact details of provider: Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
Phone: 214-768-2715
Fax: 214-768-1821
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  1. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-91, April.
  2. Soares, Jorge, 2005. "Public education reform: Community or national funding of education?," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 669-697, April.
  3. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
  4. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  5. Michele Boldrin, 1993. "Public Education and Capital Accumulation," Working Papers 9301, Centro de Investigacion Economica, ITAM.
  6. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April.
  7. Luisa Fuster, 1999. "Effects of uncertain lifetime and annuity insurance on capital accumulation and growth," Economic Theory, Springer, vol. 13(2), pages 429-445.
  8. John Strauss & Duncan Thomas, 1998. "Health, Nutrition, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 766-817, June.
  9. Blackburn, Keith & Cipriani, Giam Pietro, 2002. "A model of longevity, fertility and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 187-204, February.
  10. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June.
  11. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  12. Willem H. Buiter & Kenneth M. Kletzer, 1995. "Capital Mobility, Fiscal Policy and Growth under Self-Financing of Human Capital Formation," NBER Working Papers 5120, National Bureau of Economic Research, Inc.
  13. Knowles, Stephen & Owen, P. Dorian, 1995. "Health capital and cross-country variation in income per capita in the Mankiw-Romer-Weil model," Economics Letters, Elsevier, vol. 48(1), pages 99-106, April.
  14. Kalemli-Ozcan, Sebnem, 2002. " Does the Mortality Decline Promote Economic Growth?," Journal of Economic Growth, Springer, vol. 7(4), pages 411-39, December.
  15. Keith Blackburn & Giam Pietro Cipriani, 1998. "Endogenous fertility, mortality and growth," Journal of Population Economics, Springer, vol. 11(4), pages 517-534.
  16. Carneiro, Pedro & Heckman, James J., 2003. "Human Capital Policy," IZA Discussion Papers 821, Institute for the Study of Labor (IZA).
  17. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  18. repec:rus:hseeco:71105 is not listed on IDEAS
  19. 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.
  20. Swanson, Charles E & Kopecky, Kenneth J, 1999. "Lifespan and Output," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 213-25, April.
  21. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
  22. Nunes, Paulo A. L. D. & Schokkaert, Erik, 2003. "Identifying the warm glow effect in contingent valuation," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 231-245, March.
  23. Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-59, October.
  24. Lakshmi K. Raut, 2003. "Long Term Effects of Preschool Investment on school Performance and Labor Market Outcome," Labor and Demography 0307002, EconWPA.
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