Endogenous lifetime, accidental bequests and economic growth

Fanti, Luciano and Gori, Luca and Tramontana, Fabio (2011): Endogenous lifetime, accidental bequests and economic growth.

Abstract

his paper introduces unintentional bequests in a closed economy overlapping generations model à la Chakraborty (2004). We show that poverty traps due to scarce public investments in health can exist. However, and most important, the existence of unintentional bequests makes the health tax rate to play a prominent role in determining the stability conditions of the equilibrium in rich economies. Indeed, non-monotonic dynamics, Neimark-Sacker bifurcations and deterministic chaos can occur depending on the size of the public health system.

• Item Type: MPRA Paper
• Language: English
• Keywords: Accidental bequests; Endogenous lifetime; Health; OLG model
• Subjects: I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium

References

Abel, A.: Precautionary savings and accidental bequests. Am Econ Rev 75(4), 777–791 (1985)

Altonji, J.G., Hayashi, F., Kotlikoff, L.J.: Parental altruism and inter vivos transfers: theory and evidence. J Polit Econ 105(6), 1121–1166 (1997)

Azariadis, C.: Intertemporal Macroeconomics. Blackwell, Oxford (1993)

Barro, R.J. Becker, G.S.. Fertility choice in a model of economic growth. Econometrica 57(2), 481–501 (1989)

Barro, R.J., Sala-i-Martin, X.: Economic Growth. Second Ed. MIT Press, Cambridge (MA) (2004)

Becker, G.S., Barro, R.J.: A reformulation of the economic theory of fertility. Q J Econ 103(1), 1–25 (1988)

Bhattacharya, J., Qiao, X.: Public and private expenditures on health in a growth model. J Econ Dynam Control 31(8), 2519–2535 (2007)

Blackburn, K., Cipriani, G.P.: A model of longevity, fertility and growth. J Econ Dynam Control 26(2), 187–204 (2002)

Boeri, T., Börsch-Supan, A., Tabellini, G.: Would you like to shrink the welfare state? A survey of European citizens. Econ Pol 16(32), 7–50 (2001)

Boeri, T., Börsch-Supan, A., Tabellini, G.: Pension reforms and the opinions of European citizens. Am Econ Rev 92(2), 396–401 (2002)

Chakraborty, S.: Endogenous lifetime and economic growth. J Econ Theory 116(1), 119–137 (2004)

Chakraborty, S., Das, M.: Mortality, human capital and persistent inequality. J Econ Growth 10(2), 159–192 (2005)

Cigno, A.: Low fertility in Europe: is the pension system the victim or the culprit? In: Europe and the demographic challenge. CESifo Forum 8(2007), 37–41 (2007)

de la Croix, D., Doepke, M.: Inequality and growth: why differential fertility matters. Am Econ Rev 93(4), 1091–1113 (2003)

de la Croix, D., Doepke, M.: Public versus private education when differential fertility matters. J Devel Econ 73(2), 607–629 (2004)

de la Croix, D., Licandro, O.: Life expectancy and endogenous growth. Econ Lett 65(2), 255–263 (1999)

de la Croix, D., Ponthière, G.: On the Golden Rule of capital accumulation under endogenous longevity. Math Soc Sci 59(2), 227–238 (2010)

Diamond, P.A.: National debt in a neoclassical growth model. Am Econ Rev 55(5), 1126–1150 (1965)

Fanti, L., Gori, L.: Endogenous fertility, endogenous lifetime and economic growth: the role of child policies. MPRA Working Paper no. 26146, http://mpra.ub.uni-muenchen.de/26146/ (2010)

Fanti, L., Gori, L.: Endogenous lifetime in an overlapping generations small open economy. FinanzArch/Public Finance Anal, forthcoming (2012)

Fioroni, T.: Optimal savings and health spending over the life cycle. Eur J Health Econ 11(4), 355–365 (2010)

Fogel, R.W.: Economic growth, population theory and physiology: the bearing of long-term processes on the making of economic policy. Am Econ Rev 84(3), 369–395 (1994)

Fogel, R.W.: The Escape from Hunger and Premature Death. Cambridge University Press, New York (NY) (2004)

Galor, O., Moav, O.: Natural selection and the origin of economic growth. Q J Econ 117(4), 1133–1191 (2002)

Galor, O., Weil, D.N.: From Malthusian stagnation to modern growth. Am Econ Rev 89(2), 150–154 (1999)

Galor, O., Weil, D.N.: Population, technology, and growth: from Malthusian stagnation to the Demographic Transition and beyond. Am Econ Rev 90(4), 806–828 (2000)

Gollin, D.: Getting income shares right. J Polit Econ 110(2), 458–474 (2002)

Golosov, M., Jones, L.E., Tertilt, M.: Efficiency with endogenous population growth. Econometrica 75(4), 1039–1071 (2007)

Grandmont, J.M., Pintus, P., de Vilder, R.: Capital-labor substitution and competitive nonlinear endogenous business cycles. J Econ Theory 80(1), 14–59 (1998)

Hubbard, R.G., Judd, K.L.: Social security and individual welfare: precautionary saving, borrowing constraints, and the payroll tax. Am Econ Rev 77(4), 630–646 (1987)

Hurd, M.D.: The economics of individual aging. In: Rosenzweig, M., Stark, O. (Eds.), Handbook of Population and Family Economics. North-Holland, Amsterdam, 891–966 (1997)

Kehoe, P.J., Perri, F.: International business cycles with endogenous incomplete markets. Econometrica 70(3), 907–928 (2002)

Kraay, A., Raddatz, C.: Poverty traps, aid, and growth. J Devel Econ 82(2), 315–347 (2007)

Leung, M.C.M., Wang, Y.: Endogenous health care, life expectancy and economic growth. Pacific Econ Rev 15(1), 11–31 (2010)

Livi-Bacci, M.: A Concise History of World Population. Forth Ed. Wiley-Blackwell, Malden (MA) (2006)

Martikainen, P., Valkonen, T., Moustgaard, H.: The effect of individual taxable income, household taxable income and household disposable income on mortality in Finland, 1998-2004. Population Stud 63(2), 147–162 (2009)

Mason, A.: Saving, economic growth, and demographic change. Population Devel Rev 14(1), 113–144 (1988)

Mira, C., Fournier-Prunaret, D., Gardini, L., Kawakami, H., Cathala, J.C.: Basin bifurcations of two-dimensional noninvertible maps. Fractalization of basins. Int J Bifurcation Chaos 4(2), 343–381 (1994)

Mira, C., Gardini, L., Barugola, A., Cathala, J.C.: Chaotic Dynamics in Two-Dimensional Noninvertible Maps. World Scientific, Singapore (1996)

Moav, O., Cheap children and the persistence of poverty. Econ J 115(500), 88–110 (2005)

Zhang, J., Zhang, J.: Social security, intergenerational transfers, and endogenous growth. Can J Econ 31(5), 1225–1241 (1998)