European Business Schools Librarian's Group
Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics
No 365: Public provision of healthcare and basic science: What are the effects on economic growth and welfare?
Pintu Parui () and Klaus Prettner ()
Additional contact information
Pintu Parui: School of Economics, XIM University
Klaus Prettner: Department of Economics, Vienna University of Economics and Business
Abstract: We propose a generalized R&D-based economic growth model that incorporates i) endogenous human capital accumulation in terms of education and health, ii) endogenous population growth, and iii) the public provision of healthcare and basic science. The government taxes households to pay for healthcare personnel and basic scientists. Since these employees are not anymore available for applied science and for final goods production, important tradeoffs with respect to government spending emerge for economic growth and welfare. We show that increasing public spending, particularly on basic science, leads to faster economic growth in the medium run and tends to raise welfare when compared to actual levels of spending in Organisation for Economic Co-operation and Development (OECD) countries. Our results highlight the difficult tradeoffs associated with public expenditures for healthcare and basic science and emphasize the important role of policymakers in ensuring adequate overall public funding.
JEL-codes: H41; J24; O31; O32; O41 April 2024
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