Economic Growth and Health Dynamics with Government Subsidies for Healthcare

Abstract

The aim of this paper is to examine the dynamic interdependence between wealth accumulation and health change with government health policy. The paper focuses on how government health policy affects health change, economic growth and the dynamics of government debt within a dynamic general equilibrium framework proposed by Zhang. Economic growth, health change and government debt dynamics are interrelated with different preferences and government health policy. After building the general equilibrium model, it is demonstrated that the movement of the economic system is provided by three nonlinear differential equations. We simulate the differential equations and show how the economic system moves from its initial state. A comparative dynamic analysis is conducted in order to examine how changes in some exogenous conditions affect short-run transitory processes and the equilibrium structure.