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This paper studies capital accumulation and consumption in the traditional
Ramsey model under an exogenous growth framework. The model has three important features: (1) treating health as a simple function of consumption,
which enable the study of health and growth in an aggregate macroeconomic
model; (2) the existence of multiple equilibria of capital stock, health, and
consumption, which is more consistent with the real world situation - rich
countries may end up with high capital, better health, and higher consumption
than poor countries; (3) the fundamental proposition of a consumption tax
instead of capital taxation from the traditional growth model does not hold
anymore in our model. As long as consumption goods contribute to health formation, the issue of a consumption tax versus an income (or capital) tax
should be re-examined.
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