Health, growth and welfare: a theoritical appraisal of the long run impact of medical R&D

This paper aims at providing a simple economic framework to address the question of the optimal share of investments in medical R&D in total public spending. In order to capture the long-run impact of tax-financed medical R&D on the growth rate, we develop an endogenous growth model in the spirit of Barro [1990]. The model focuses on the optimal sharing of public resources between consumption and (non-health) investment, medical R&D and other health expenditures. It emphasizes the key role played by the public health-related R&D in enhancing economic growth and welfare in the long run.