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Endogenous lifetime, intergenerational mobility and economic development

Aso, Hiroki (2021): Endogenous lifetime, intergenerational mobility and economic development.

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Abstract

This paper analyzes the interactions among lifetime, intergenerational mobility and economic development in overlapping generations framework. In addition, we explain the mechanism that causes two motions of intergenerational mobility, monotonous motion and cyclical motion, which are observed in empirical studies. We show that these motions of mobility depend crucially on lifetime. We assume that lifetime increases through health effect with economic development. Increasing lifetime encourages incentives of education investment while decreasing transfer, which is the funding source for education. If lifetime slowly increases sufficiently, mobility monotonically increases while income inequality decreases. However, if lifetime increases rapidly with economic development, the economy exhibits cyclical and even chaotic behavior. Even if we consider that differential lifetime between the educated and the uneducated, we get two motions of mobility: monotonous and cyclical motion.

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