Atsue Mizushima
The Demand of Health and Economic Growth in an Aging Economy

Abstract: The purpose of this paper is two fold. First, we construct a model of health demand, and then examine effects of population aging on economic growth and welfare. Second, we assume that a household's health status in old age is a commodity produced at home by using the health expenditure which is supplied by both young individuals (children) and old one (parents). In addition to this, we also assume that health expenditure is divided into two types of expenditure, one is indirect health expenditure, that is, exercises, foods and preventive medicines, and other is direct health expenditure, that is, medical expenses to doctors and nursing care. By analyzing the model, we show the following. First, the life expectancy has positive effect on the economic growth. Next, the life expectancy has positive effect on the welfare of initial old generation, though, it is sufficiently small, the life expectancy has negative effect on the welfare of future generation.

JEL: I10, J14, O41.
Keywords: household health production, economic growth, aging, overlapping generations model.



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