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Endogenous lifetime and economic growth: the roleof the tax rate

Author

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  • Laurent Brembilla

    (PSL, Université Paris-Dauphine, LEDa
    IRD, UMR Dial)

Abstract

This paper revisits the health-economic growth nexus from the seminal contribution of Chakraborty (J Econ Theory 116(1):119–137, 2004). In his two periods overlapping generations model with a lifetime depending on public health expenditures, I study the influence of the tax rate on the economy. This enables me to determine in which cases the health policy can spur economic growth. I present three results: (i) In the endogenous growth case, the health policy can eradicate some poverty traps. (ii) The growth-maximizing tax rate is 0 in low-income countries. (iii) The steady state income level is an inverted U-shaped function or a decreasing function of the tax rate.

Suggested Citation

  • Laurent Brembilla, 2016. "Endogenous lifetime and economic growth: the roleof the tax rate," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(2), pages 247-263, October.
    • Handle: RePEc:spr:etbull:v:4:y:2016:i:2:d:10.1007_s40505-015-0084-6
    DOI: 10.1007/s40505-015-0084-6
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    References listed on IDEAS

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    1. Klaus Prettner, 2013. "Population aging and endogenous economic growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 811-834, April.
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    6. de la Croix, David & Licandro, Omar, 1999. "Life expectancy and endogenous growth," Economics Letters, Elsevier, vol. 65(2), pages 255-263, November.
    7. Kunze, Lars, 2014. "Life expectancy and economic growth," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 54-65.
    8. Philippe Aghion & Peter Howitt & Fabrice Murtin, 2011. "The Relationship Between Health and Growth: When Lucas Meets Nelson-Phelps," Review of Economics and Institutions, Università di Perugia, vol. 2(1).
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    11. Quamrul H. Ashraf & Ashley Lester & David N. Weil, 2009. "When Does Improving Health Raise GDP?," NBER Chapters, in: NBER Macroeconomics Annual 2008, Volume 23, pages 157-204, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Cui, Xiaodong & Chang, Ching-Ter, 2020. "How life expectancy affects welfare in a Diamond-type overlapping generations model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 555(C).
    2. Brembilla, Laurent, 2018. "Longevity and welfare in general equilibrium," Mathematical Social Sciences, Elsevier, vol. 93(C), pages 22-36.

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    More about this item

    Keywords

    Endogenous longevity; Economic growth; Health and economic development; Overlapping generations;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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