Essays on health and economic growth

This thesis consists of three chapters. The first chapter is ‘Endogenous Fertility in a Growth Model with Public and Private Health Expenditures’. In this chapter, we build an overlapping generations model that incorporates endogenous fertility choices, in addition to public and private expenditures on health. Following the seminal analysis of Bhattacharya and Qiao (JEDC, 2007) we assume that the effect of public health investment is complementary to private health expenditures. We find that this effect reinforces the positive impact of the capital stock on aggregate saving. Furthermore, this complementarity can provide an additional explanation behind the salient features of demographic transition; that is the fertility decline along the process of economic growth. The second chapter is ‘Growth and Demographic Change: Do Environmental Factors Matter?’. In this chapter, we incorporate health-damaging pollution into a three-period overlapping generations model in which life expectancy, fertility and economic growth are all endogenous. We show that environmental factors can cause significant changes to the economy’s demographics. In particular, the entrepreneurial choice of less polluting production processes, induced by environmental policy, can account for such demographic changes as higher longevity and lower fertility rates. Thus, we provide a novel environment channel of demographic transition. The third chapter is ‘The Effects of Foreign Aid on Growth: Health Aid versus Untied Aid’. In this chapter, we build an overlapping generations model with foreign aid and private health expenditures. The effect of an increase in foreign aid on growth is ambiguous as it depends on the proportion of health aid and the proportion of untied aid allocation to individuals. We also introduce health aid in the production function and we find that the growth impact is non-monotonic. There are thresholds of aid for which the growth impact of aid is negative (positive) if aid lies within (outside) these thresholds.