NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Equilibrium Health Spending and Population Aging in a Model of Endogenous Growth - Will the GDP Share of Health Spending Keep Rising?

Isaac Ehrlich, Yong Yin

NBER Working Paper No. 19856
Issued in January 2014, Revised in March 2014
NBER Program(s):Aging, Economic Fluctuations and Growth, Health Care, Health Economics, Public Economics

The apparently unrelenting growth in the GDP-share of health spending (SHS) has been a perennial issue of policy concern. Does an equilibrium limit exist? The issue has been left open in recent dynamic models which take income growth and population aging as given. We view these variables as endogenously determined within an overlapping-generations, human-capital-based endogenous-growth model, where a representative parent makes all life-cycle consumption and investment decisions and life and health protection are subject to diminishing returns. Our prototype model, allowing for both quantity and quality of life as desired goods, yields equilibrium upper bounds for SHS. Our calibrated simulations also account for observed trends in reproductive choices, population aging, life expectancy, and economic growth. The analysis offers new insights about factors that drive long-term trends in aging and health spending and establishes a direct relation between health investments at young age and the equilibrium, steady-state rate of economic growth.

download in pdf format
   (942 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19856

Published: Isaac Ehrlich & Yong Yin, 2013. "Equilibrium Health Spending and Population Aging in a Model of Endogenous Growth: Will the GDP Share of Health Spending Keep Rising?," Journal of Human Capital, University of Chicago Press, vol. 7(4), pages 411 - 447. citation courtesy of

Users who downloaded this paper also downloaded* these:
Gaynor, Ho, and Town w19800 The Industrial Organization of Health Care Markets
Bloom, Canning, and Fink w16705 Implications of Population Aging for Economic Growth
Ehrlich w12868 The Mystery of Human Capital as Engine of Growth, or Why the US Became the Economic Superpower in the 20th Century
Ehrlich and Yin w18444 The Problem of the Uninsured
Ehrlich and Yin w10759 Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us