Public Investment, Health Infrastructure and Income Growth

Abstract

Based on individual occupational choice in a model including a production function with public investment and public health infrastructure, this paper presents an examination of how allocation of public investment and public health infrastructure affects the dynamics of income. Individuals work as skilled laborers or unskilled laborers, as in the model described by Caselli (1999), and educational costs are necessary to work as a skilled laborer. Results show that government should provide both public investment and public health infrastructure to escape from the poverty trap with low income. Moreover, based on an initial allocation between public investment and public health infrastructure, it is decided how the government should form a policy to increase income growth.