Interest rates and endogenous population growth: joint age-dependent dynamics

Brito, Paulo (2014): Interest rates and endogenous population growth: joint age-dependent dynamics.

Abstract

This paper presents a uncertain-lifetime overlapping-generations continuous time model for an Arrow-Debreu economy with endogenous fertility, in which age-dependent variables are explicitly introduced. The general equilibrium paths for the discount factor and newborns are derived from a system of two coupled forward-backward integral equations. The forward mechanism is related to aggregation between cohorts and the backward mechanism to life-cycle decisions. We study changes in the age-dependent profiles of age-dependent distributions for productivity and time use. We show that high maximum ages of productivity and child-rearing fitness increase the long run interest and growth rates, and low maximum ages can lead to asset pricing bubbles and negative population growth rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: OLG, endogenous fertility, Arrow-Debreu, integral equations
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; J - Labor and Demographic Economics > J1 - Demographic Economics

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