Endogenous health care, life expectancy and economic growth

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

18 Scopus Citations
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Original languageEnglish
Pages (from-to)11-31
Journal / PublicationPacific Economic Review
Volume15
Issue number1
Publication statusPublished - Feb 2010

Abstract

We study the endogenous relationship between health care, life expectancy and output in a neoclassical growth model. Although health care directly diverts resources away from goods production, it prolongs life expectancy, which in turn leads to higher savings and, hence, capital formation through a private annuity market. We show that savings and health care are complements in equilibrium, with both rising with economic development. Our model is therefore consistent with several observed stylized development patterns across countries. Moreover, through the longevity-enhancing channel, health care and health production technology are found by simulation to be growth and welfare promoting.

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