Endogenous lifetime and economic growth: the role of the tax rate

Laurent Brembilla
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Laurent Brembilla: LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, IRD [Ile-de-France] - Institut de Recherche pour le Développement

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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.

Keywords: Endogenous longevity; Economic growth; Health and economic development; Overlapping generations (search for similar items in EconPapers)
Date: 2015
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Published in Economic Theory Bulletin, 2015, ⟨10.1007/s40505-015-0084-6⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01273511

DOI: 10.1007/s40505-015-0084-6

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