Health care, child allowance, and education subsidy

This paper constructs a small open two-sector (the health care sector and the non-health care sector) overlapping generations model and takes the resource cost of child education into account.Under this model, labors can be allocated to either sector and human capital can be accumulated over time. This paper investigates how population aging affects human capital accumulation and labor productivity of the non-health care sector. We show that population aging induces a labor shift towards the health care sector, thus affecting the human capital level and wage rate per unit of human capital negatively. This paper also examines the effects of public policies for child care and education. We show that under a certain range of subsidy rates, either type of child care subsidy policy affects the lifetime utility of future generations positively, while the education subsidy policy is beneficial to both current and future generations