Population Aging and Economic Growth: the effect of health expenditure

Atsue Mizushima ()

No ECO2008/35, Economics Working Papers from European University Institute

Abstract: Rising longevity has led to population aging in developed countries, causing increasing concerns about its economic impact. Specially, the trend of population aging increases health expenditure in developed countries, and 70% to 80% of health expenditure is funded by public sector. Therefore, this paper focuses on the health demand in an aging economy and examines how the aging of the population and public health funding (PHF) affects agents' behavior. For this purpose, we construct a simple growth model and examine the e®ect of aging and PHF on saving and the growth rate. We show that an increase in life expectancy increases the growth rate in the economy without PHF, but that it has an inverted U-shaped relation in the economy with PHF. From the welfare standpoint, we show that it increases the intergenerational conflict between current and future generation and that PHF has the result of alleviating the conflict.

Keywords: life expectancy; household production; economic growth; social welfare (search for similar items in EconPapers)
JEL-codes: I10 J14 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-hap and nep-hea
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:eui:euiwps:eco2008/35

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