Public and private expenditures on health in a growth model

Abstract

This paper introduces endogenous longevity into 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. Such private health investments are assumed to be more 'productive' if accompanied by complementary tax-financed public health programs. The presence of the 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. The model is capable of generating dramatic reversals in life expectancy as has been observed in many countries. r

Longevity and environmental quality in an OLG model

“…Starting with τ , we have two positive terms: [2] and [5] and two negative ones [1] and [4]. The terms [2] and [4] are standard.…”

“…Turning to ξ, we have one negative effects [1] and a positive one [3]. The first one [1] is standard and negative; the second one, positive effect [3] says that by taxing health care, people do not live as long as without such a tax and this has a relief effect on the fixed quality of environment.…”

“…In the recent years, the study of interactions between economic development and longevity has been particularly enriched by OLG models with endogenous longevity (Chakraborty, 2004;Bhattacharya and Qiao, 2005;Zhang et al, 2006). But those models, by making longevity depend on (private and/or public) health expenditures only, tend to neglect the influence of the natural environment on longevity.…”

“…It is here postulated that individuals, when choosing their health spending, do not internalize the impact of their decisions on the number of persons. 1 Given that the earth is, in Boulding's (1966) terms, nothing else than a 'spaceship', such an externality may have strong welfare consequences. 2 The finiteness of the earth can affect welfare either indirectly, through the constraints it imposes on production possibilities, or directly, through the welfare loss due to overcrowding.…”

Existence and stability of overconsumption equilibria

“…Under low longevity levels, economic growth and longevity are positively related, but not under high longevity levels. 1 While those models assume exogenous longevity, other papers, such as Blackburn and Cipriani (2002) and Chakraborty (2004), study the output / longevity relationship while modelling survival conditions as an output of the economy. 2 A major common feature of those frameworks is the modelling of the twodirectional relation between economic growth and survival conditions.…”