human capital inequality life expectancy and economic growth this article presents a model in which inequality affects per capita income when individuals decide to invest in education taking into account their life expectancy which depends to a large extent on the human capital of their parents our results show the existence of multiple steady states depending on the initial distribution of education the low steady state is a poverty trap in which children raised in poor families have low life expectancy and work as non educated workers the empirical evidence suggests that the life expectancy mechanism explains a major part of the relationship between inequality and human capital accumulation increases in life expectancy and human capital accumulation have accelerated since the post world war ii period in most parts of the world however in spite of the convergence in life expectancy across countries during this period see for example becker et al 2005 in 2000 there was still an immense gap between the rich and the poor world life expectancy was 78 years in oecd countries but only 47 years in sub saharan africa where the gap with rich countries is increasing nowadays due to aids being widespread likewise the striking disparities in human capital are also evident whereas the secondary school enrolment rate was almost 100 in rich countries more than 70 of children in sub saharan africa were not enrolled in secondary schooling and therefore entered the labour market as unskilled workers from childhood these disparities in schooling are also accompanied by huge differences in the distribution of education thus the human capital gini coefficient in sub saharan africa 0 56 is twice as high as that of oecd countries 0 21 in this article we argue that high human capital inequality low life expectancy and low human capital accumulation rates reinforce each other and may explain the persistence of poverty in a great part of the world

the cost of pollution on longevity welfare and economic stability this paper presents an overlapping generations model where pollution private and public health expenditures are all determinants of longevity public expenditures financed through labour taxation provide both public health and abatement we study the role of these three components of longevity on welfare and economic stability at the steady state we show that an appropriate fiscal policy may enhance welfare however when pollution is heavily harmful for longevity the economy might experience aggregate instability or endogenous cycles nonetheless a fiscal policy which raises the share of public spending devoted to health may display stabilizing virtues and rule out cycles this allows us to recommend the design of the public policy that may comply with the dynamic and welfare objectives

consumer information and providers reputations an empirical test in the market for psychotherapy this paper estimates the price effects of provider specific reputations measured as the percent of each provider s clients who are referred by informed community sources such as other health professionals school counselors businesses clergy and attorneys using data on the prices of outpatient psychotherapy visits to private practice social workers in massachusetts the results suggest that social workers with established reputations for high quality care charge higher prices in addition the results suggest that intra and inter professional competition can constrain the pricing decisions of psychotherapists and that increasing consumer information increases the effectiveness of this competition

the effect of life expectancy on fertility saving schooling and economic growth theory and evidence we construct a simple growth model where agents with uncertain survival choose schooling time life cycle consumption and the number of children we show that rising longevity reduces fertility but raises saving schooling time and the growth rate at a diminishing rate cross section analyses using data from 76 countries support these propositions life expectancy has a significant positive effect on the saving rate secondary school enrollment and growth but a significant negative effect on fertility through sensitivity analyses the effect on the saving rate is inconclusive while the effects on the other variables are robust and consistent these estimated effects are decreasing in life expectancy

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

health education and life cycle savings in the development process this paper studies investment in health and human capital in a life cycle model health investment enhances survival to old age by improving health from its endowed level the model predicts two distinctive phases of development when income is low enough the economy has no health investment and little savings leading to slow growth when income grows health investment will become positive and the saving rate will rise leading to higher life expectancy and faster growth a health subsidy can move the economy from the first phase to the next subsidies on health and human capital investments can improve welfare

demographics productivity growth and the macroeconomic equilibrium i introduction the demographics in the united states are as in other industrial countries experiencing drastic changes the birth rate is falling while life expectancy is rising as a consequence the ratio of the elderly to the working age population is projected to rise sharply in the next fifty years the aging of the population imposes both real and imagined burdens on the economy aaron 1990 most importantly it is predicted to cause substantial increases in the tax rates needed to sustain existing social security benefits thereby bringing about an increase in conflict between the working and the elderly generations wildasin 1991 von weizsacker 1990 and verbon 1988 population aging also means it is more likely that the pay as you go system of financing social security will be dynamically inefficient hu 1993 in this case the economy is better served by switching to another financing system indeed a number of countries most notably chile have chosen to privatize their state pension systems more broadly there is evidence that the changing age distribution in the u s population has significantly affected consumption housing investment money demand and the labor force participation rate fair and dominguez 1991 and is potentially very important for explaining the u s rate of national saving for the next fifty years auerbach and kotlikoff 1990 it also affects capital accumulation by causing changes in family insurance and intergenerational trade ehrlich and lui 1991 existing studies of the economic effects of demographics assume either that both work hours and retirement behavior are exogenous or that work hours are endogenous but retirement behavior is exogenous for example cutler poterba sheiner and summers 1990 model the labor market effects of population aging by imposing the projected age distributions on the current labor force participation rates across age cohorts rather than on those corresponding to the projected demographics as such they implicitly assume exogenous work hours and concentrate on the age distribution effect of population aging auerbach and kotlikoff 1990 set an exogenous retirement age of sixty five although they allow endogenous determination of work hours feldstein 1980 provides evidence that incorporation of induced retirement improves the prediction of how social security affects capital accumulation likewise studies of the effects of demographic changes and their interactions with social security will be more fruitful if retirement decisions are explicitly recognized this is particularly true since the 1983 amendment to the social security act would gradually relax the retirement test thus removing the distortions that prevent retirement decisions from adjusting to changing demographics this paper provides a computational study of the effects of demographics on the macroeconomic equilibrium and welfare within the framework of an intertemporal optimizing model with age heterogeneity and endogenous productivity growth the model extends tobin 1967 and cass and yaari 1967 to allow for endogenous retirement decisions it differs from hu 1978 1993 in that it incorporates endogenous productivity growth a key feature that differentiates this analysis from previous studies is that retirement decisions are characterized by a binary choice of whether to work or not to work but work hours are exogenous during working years 1 to facilitate comparisons we also provide a simulation which shows what would happen if social security provisions were such as to prevent the retirement age from adjusting to the demographic changes to study the effects of demographics on the macroeconomic equilibrium involves explaining their effects on the labor force participation rate and aggregate consumption their interactions with social security and their implications for the welfare of the economy

prices and qualities in markets with costly information this paper extends the seminal work of akerlof and salop and stiglitz in two directions i the sellers can select both the selling prices and quality levels of their good and ii the buyers can acquire price quality information about individual sellers at a cost we observe multiple price quality combinations in equilibrium which depend upon the distribution of information costs of consumers and upon whether quality or price or both are costly observable welfare comparisons of equilibrium are considered we show that welfare will be greater when price advertising is permitted

patients trust and the quality of physicians patients are uncertain of physicians quality but learn about the quality of particular physicians through experience in treatment patients come to trust physicians who have served them well this paper explores the economic consequences of patients learning and trust within a model of the market for physicians services in a market equilibrium there are too many incompetent physicians in practice surprisingly even the more competent physicians have an interest in preventing patients from judging quality except through experience as we show all physicians including the most competent may oppose steps to inform patients of physicians quality

modelling probabilities of devaluations i show why when the realized rates of depreciation within the exchange rate band are regressed on a given information set and conditioned on ex post actual no realignment a la drift adjustment a peso problem is still encountered the reason is that the frequency of realignments in the data need not be the same as the frequency of the even small subjective probabilities that a realignment may take place i suggest an alternative approach to solve the peso problem and provide consistent estimates my estimates of the expected realignment rates are greater than the ones obtained using the drift adjustment method

mortality decline and long run economic growth this paper examines the impacts of mortality decline on long run growth in a dynastic family two sector growth model with social security a rise in longevity has direct effects on fertility human capital investment and growth as well as indirect effects through increasing unfunded social security contributions both the direct and indirect effects depend on the relative strength of the tastes for the number and welfare of children and may have different signs the net effects of rising longevity on fertility tend to be negative but positive on human capital investment and growth c 2001 elsevier science s a all rights reserved

life expectancy and human capital evidence from the international epidemiological transition exploiting preintervention variation in mortality from various infectious diseases together with the time variation arising from medical breakthroughs in the late 1940s and the 1950s this study examines how a large positive shock to life expectancy influenced the formation of human capital within countries during the second half of the 20th century the results establish that the rise in life expectancy was behind a significant part of the increase in human capital over this period according to the baseline estimate for one additional year of life expectancy years of schooling increase by 0 17 year moreover the evidence suggests that declines in pneumonia mortality are the underlying cause of this finding indicating that improved childhood health increases human capital investments

aging growth and the allocation of public expenditures on health and education in this paper i develop an overlapping generations endogenous growth model in which both public education and health are sources of growth by affecting the accumulation rate of the human capital stock and the savings rate over life expectancy i first find that dynamic complementarities of public expenditures lead to minimum threshold levels of public education and health expenditures that ensure sustainable growth i then show how governments can use the allocation of public expenditures as an alternative policy instrument to maximize growth without increasing the tax rate or the retirement age as usually happens in aging economies resume vieillissement croissance et l allocation des depenses publiques en sante et en education dans ce texte l auteur developpe un modele de croissance endogene avec des generations qui se chevauchent dans lequel les services publics en sante et en education sont des sources de croissance en raison du fait qu ils affectent le taux d accumulation du stock de capital humain et le taux d epargne au cours du cycle de vie on decouvre que les complementarites dynamiques des depenses publiques determinent des seuils minimaux de depenses publiques en sante et en education qui assurent une croissance durable on montre comment les gouvernements peuvent utiliser l allocation des depenses publiques comme un instrument de politique publique de rechange pour maximiser la croissance sans accroitre le taux d imposition ou l ge de la retraite comme cela se fait d habitude dans les economies vieillissantes

demographic change human capital accumulation and r d based growth employing an overlapping generations model of r d based growth with endogenous fertility and education decisions we examine how demographic changes induced by an increase in life expectancy influence the long run growth rate of the economy we demonstrate that life expectancy when relatively low high positively negatively affects economic growth this paper also compares the growth implications of child education subsidy policies i e policies for enhancing basic education and child rearing subsidy policies i e pro natal policies and demonstrate that while the child education subsidies consistently foster economic growth child rearing subsidies may negatively affect economic growth

cause of death and development in the us abstract exploiting cross state variation in infectious causes of death along with time variation arising from medical innovations toward the middle of the twentieth century this study examines the consequences of a positive health shock in the us it establishes that states with higher levels of mortality from infectious causes prior to the onset of the era of big medicine experienced greater increases in life expectancy population and total gdp after its onset whereas per capita gdp remained largely unchanged together the evidence suggests that the rise in life expectancy had no significant effect on living standards in the us during the time period 1940 1980 these results are robust to controlling for initial health and initial economic conditions

prices as signals of product quality this paper is concerned with the provision of quality in markets in which consumers have only imperfect information the analysis focuses on a market for a product that can be produced at different quality levels all consumers prefer higher to lower quality but they may differ in their willingness to pay for quality producers can produce any quality they like but higher qualities are more costly to produce the information in this market is imperfect in the sense that the exact quality chosen by a firm is known only to the firm itself some information about the quality of a firm s product will however reach its potential customers even if they do not make any special effort to acquire it within the framework suggested here two conclusions are drawn first prices may serve as signals which exactly differentiate the available quality levels that is there exists a fulfilledexpectations equilibrium at which each price signals a unique quality level second the pricesignals are not arbitrary each price signal exceeds the marginal cost of producing the quality it signals such a mark up depends on the nature of the product specific information received by consumers the poorer the information the higher the mark up

the role of socio political and economic factors in fertility decline a cross country analysis summary in this paper we have examined the fertility transition across countries in four different income categories from social economic political and population policy perspectives we examine whether and how social economic political and population policy factors contribute to the decline in fertility rates in countries with different income levels and our findings suggest that these factors can have very different effects on fertility rates in these countries political freedom is found to play a role in shaping people s perceptions of fertility and has different effects on fertility for countries in different income categories worsening political freedom in upper middle income countries exerts downward pressure on fertility rates while it contributes a positive effect to fertility rates in lower middle and low income countries urbanization if implemented successfully can be an effective approach to further reduce the fertility rate for countries with lower income levels and higher rural populations population policies measured by the contraception prevalence rate have been found to be effective in reducing the tfr in upper middle income lower middle income and low income countries from the intra country analysis population policies are confirmed to be the main tool used by china and bangladesh to cut down their tfr human capital is confirmed to be one of the most important determinants in explaining the decline in fertility rates across all income categories the significant policy implication of these findings for policy makers in those lower middle income and low income countries is to invest more in education which can have a notable impact on people s perceptions of fertility and eventually this could help to effectively reduce their fertility levels in a more natural way than could be achieved by aggressive population policies

the relation between wealth and health evidence from a world panel of countries abstract based on a world sample of countries this paper presents panel data evidence that documents a u shaped relation between gdp per capita wealth and life expectancy health the evidence also shows that excluding the possibility of a nonmonotonic relationship induces erroneous conclusions about the time varying wealth health correlation

longevity and life cycle savings we add health and longevity to a standard model of life cycle saving and show that under plausible assumptions increases in life expectancy lead to higher savings rates at every age even when retirement is endogenous in a stationary population these higher savings rates are offset by increased old age dependency but during the disequilibrium phase when longevity is rising the effect on aggregate savings rates can be substantial we find empirical support for this effect using a cross country panel of national savings rates

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

target zones and realignments recent contributions emphasize that the presence of exchange rate target zones has important effects on the within band behavior of exchange rates when agents are forward looking the authors find that the implications of available models are inconsistent with european exchange rate data and they suggest that the frequent realignments occurring in the period they consider may be responsible for this they construct a model in which the likelihood of a realignment in the near future increases as the exchange rate approaches the limits of its fluctuation band and show that its implications are broadly consistent with the evidence copyright 1992 by american economic association

intergenerational trade longevity and economic growth we develop an overlapping generations model of endogenous growth in which human capital is the engine of growth and the generations are linked through material and emotional interdependencies within the family parents invest in their children to achieve both old age support care and emotional gratification and material support from children is determined through self enforcing implicit contracts we show that optimal intergenerational trade can then lead to maximization of growth opportunities our model produces a theory of the demographic transition linking longevity fertility and economic growth we also show that while population aging may raise the growth rate an increase in young age longevity is likely to produce a greater increase in the growth rate and a reduction in the fertility rate in a growth equilibrium these predictions and the model s implications concerning the behavior of private savings during the takeoff period appear consistent with empirical evidence

from malthus to modern growth can epidemics explain the three regimes we model demographic and economic long run development in a setting where mortality is endogenous and subject to epidemic shocks the model replicates the full transition from malthusian stagnation to modern growth consistent with the historical facts the economy also passes an intermediate post malthusian phase where growth rates of both population and per capita income increase simultaneously as mortality rates fall and become less volatile the escape from the malthusian trap is the result of a series of mild epidemic shocks making it inevitable at some stage but its timing random calibrations show that it can differ by thousands of generations absent differences in exogenous parameters

health spending savings and fertility in a lifecycle dynastic model with longevity externalities we investigate health spending savings fertility and policy implications in a lifecycle dynastic model with longevity externalities in annuity returns we show that such externalities engender not only excessive health spending but also under saving and excessive fertility social security and health subsidization increase health spending and savings but reduce fertility from laissez faire levels a publicly funded universal health system under labour income taxation raises fertility taxing health spending or using social security and public health together can obtain socially optimal health spending savings longevity and fertility numerical results based on us observations suggest substantial variations among these cases especially in old age health spending

barriers to prosperity parasitic and infectious diseases iq and economic development iq scores differ substantially across nations this study argues that cross country variations in iq scores to a large extent reflect the burden of parasitic and infectious diseases pids and iron and iodine deficiency iid in infancy and in utero furthermore it is shown that the prevalence of health insults through the channel of cognitive ability is influential for the level as well as the growth in productivity across the world using data for 181 countries and an instrumental variable approach regressions reveal that the prevalence of pid iids is influential for growth and income inequalities globally

elderly labor supply and fertility decisions in aging population economies with a longer life expectancy individuals who plan to work when they are old may increase the number of their children therefore when individuals choose the time of retirement the fertility rate may not necessarily decline but even rise

prices product qualities and asymmetric information the competitive case recent developments in the economics of information emphasize the informational content of prices we examine the degree to which prices convey information on product quality to uninformed agents under perfect competition we show that a rational expectations equilibrium may not exist when an equilibrium does exist the information on quality conveyed by prices depends on the shape of the average cost curves and the relative numbers of informed and uniformed agents

education lifetime labor supply and longevity improvements this paper presents an analysis of the differential role of mortality for the optimal schooling and retirement age when the accumulation of human capital follows the so called ben porath mechanism we set up a life cycle model of consumption and labor supply at the extensive margin that allows for endogenous human capital formation this paper makes two important contributions first we provide the conditions under which a decrease in mortality leads to a longer education period and an earlier retirement age second those conditions are decomposed into a ben porath mechanism and a lifetime human wealth effect vs the years to consume effect finally using us and swedish data for cohorts born between 1890 and 2000 we show that our model can match the empirical evidence

social security and endogenous growth abstract this paper examines the effects of social security on the steady state growth of per capita income in an endogenous growth model in which agents care about their own consumption the number of children and the welfare of each child it shows that an unfunded program may simulate growth by reducing fertility and increasing the ratio of human capital investment per child to per family income when bequests are positive also it may cause faster growth than funded programs especially when receipts from funded programs are independent of contributions when voluntary saving is positive funded social security is neutral if receipts are linked to contributions and most likely depresses growth if receipts are independent of contributions

life expectancy and endogenous growth we consider an overlapping generations model with uncertain lifetime and endogenous growth individuals have to choose the length of time devoted to schooling before starting to work we show that it depends positively on life expectancy but that the positive effect of a longer life on growth could be offset by a decrease in the participation rate dynamics are characterized by a delay differential equation and human capital converges with oscillations to a balanced growth path

endogenous fertility and optimal population size pareto optimality which is the standard criterion of efficiency in general equilibrium models takes population size as given and therefore cannot be directly applied to analyze the question of optimal population size the criterion then for optimal population size must be based on a more restrictive definition of optimality this paper extends peter diamonds 1965 golden golden rule growth model by assuming that individuals derive utility from their own consumptionand from their own children offspring are assumed to consume resources before reaching adulthood the authors show that the optimal steady state utility yields a higher population growth rate when it converges to the golden rule allocation they then demonstrate that a voluntary social security program in which the size of the transfer to a particular agent is directly tied to his own fertility leads the competitive allocation to be identical to the allocation corresponding to the maximum of the steady state utility of the representative individual

interest rates in the nordic countries evidence based on devaluation expectations over the period 1979 92 investments in danish and norwegian kroner in the euromarket have had an annual excess return of about 2 and 1 1 per cent compared to investments in the euromarket in foreign currencies assuming risk neutrality the subjective probability of a devaluation within the next month is derived from the excess returns on the euromarket these derived probabilities are found to be inconsistent with the actual number of devaluations that have taken place over this period so that the probability of devaluation has been significantly overrated for denmark and norway

the rise in life expectancy and economic growth in the 20th century this research exploits conditional exogenous variation in mortality from the diffusion of modern medicine to study the effect of growth in life expectancy on the growth in gdp per capita the empirical analysis establishes that countries that obtained higher growth rates of life expectancy due to this shock to mortality in the mid twentieth century experienced lower growth rates of gdp per capita in the second half of the twentieth century in addition a negative relationship between initial level of life expectancy and the subsequent growth rate of gdp per capita is found

life expectancy human capital social security and growth we analyze the effects of changes in the mortality rate upon life expectancy education retirement age human capital and growth in the presence of social security we build a vintage growth overlapping generations model in which individuals choose the length of education and the age of retirement and where unfunded social security pensions depend on workers past contributions social security has a positive effect on education but pension benefits favor reductions in retirement age the net effect is that starting from a benchmark case higher life expectancies give rise to lower per capita gdp growth in the presence of social security as the share of the active population is reduced in addition higher social security contribution rates reduce the growth rate of per capita gdp

vintage human capital demographic trends and endogenous growth we study how economic growth is affected by demographics in an overlapping generations model with a realistic survival law individuals optimally chose the dates at which they leave school to enter the labor market and at which they retire endogenous growth arises thanks to the accumulation of generation specific human capital favorable shifts in the survival probabilities always induce longer schooling and later retirement but have an ambiguous effect on growth the relationship between the growth of population and per capita growth is hump shaped increases in longevity can be responsible for a switch from a no growth regime to a sustained growth regime and for a positive relationship between fertility and growth to vanish

optimal social security in a dynastic model with human capital externalities fertility and endogenous growth abstract in this paper we investigate the optimal scale of pay as you go social security in a dynastic family model with human capital externalities fertility and endogenous growth human capital externalities reduce the return to human capital investment and hence lead to under investment in human capital and over reproduction of the population if the taste for the number of children is sufficiently weak relative to the taste for the welfare of children social security can be welfare enhancing by reducing fertility and raising human capital investment per child

age dependency and labour productivity divergence abstractthis study finds strong empirical evidence in favour of the hypothesis that the age composition of population matters for labour productivity growth we applied the fixed effects panel model using data on a large number of countries over the period 1980 2010 our results suggest that higher age dependency not only directly impacts negatively on labour productivity but also modifies the impact of other determinants of labour productivity child dependency has a more adverse effect on labour productivity than old age dependency we specifically find that the marginal effects of gross capital formation information and communication improvement and labour market reforms are significant at lower levels of age dependency however the marginal effect of savings on labour productivity is high at a high level of age dependency the impact of age dependency varies between developed and developing economies diversity in the size and nature of age dependency across regions and different income groups help

basic needs government debt and economic growth this paper investigates the relationships between basic needs and economic growth where the interactions between output health nutrition and education are explicitly simultaneous we find a unidirectional relationship that improving basic welfare contributes strongly to labour productivity change but a clear reverse causation only from growth to nutrition there are substantial differences in the patterns of simultaneous interactions at different income and welfare levels there are strong self reinforcing effects of literacy and debt service on poverty making it difficult for poor countries to rectify their situation channelling resources towards improving health education and nutrition could bring dramatic economic returns