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.

Number of Pages in PDF File: 32

Keywords: longevity, overlapping generations, public health, chaos

JEL Classification: E10, J10, O10, O40

Accepted Paper Series