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The Speed of Convergence in a Two-Sector Growth Model with Health Capital

Kei Hosoya

No 245, Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: In this paper we will show that for empirically plausible parameter values, a two-sector growth model contained health capital can yield a slow speed adjustment process. Calibrating the model, we demonstrate that in the case of a capital deepening externality in the health sector has relatively weak impact on additional health capital production and income tax rates which finance public health expenditure are at realistically reasonable levels, a slower speed of convergence occurs. Such slower adjustment process is consistent with the standard empirics on convergence. Consequently, we stress the good harmonization between a calibration-based theoretical prediction and the corresponding evidence.

Keywords: Capital deepening externality; Health capital accumulation; Speed of convergence (search for similar items in EconPapers)
JEL-codes: E62 I18 O41 (search for similar items in EconPapers)
Date: 2005-01
Note: January 8, 2005
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