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ENDOGENOUS HEALTH CARE, LIFE EXPECTANCY AND ECONOMIC GROWTH
Author(s) -
Leung Michael C. M.,
Wang Yong
Publication year - 2010
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2009.00486.x
Subject(s) - stylized fact , life expectancy , economics , endogenous growth theory , health care , welfare , overlapping generations model , capital accumulation , growth model , longevity , production (economics) , human capital , labour economics , macroeconomics , economic growth , market economy , medicine , population , gerontology , environmental health
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.