Existence and stability of overconsumption equilibria

Gregory Ponthiere

Economic Modelling, 2011, vol. 28, issue 1-2, 74-90

Abstract: Growth models with endogenous mortality assume generally that life expectancy is increasing with output per capita and, thus, with individual consumption, whatever its level is. However, empirical evidence supports a U-shaped relationship between consumption and mortality, implying that the monotonicity of that relation is local but not global. This paper develops a two-period OLG model where life expectancy is a non-monotone function of consumption, and where agents form myopic anticipations about life expectancy. The existence, uniqueness and stability of steady-state equilibria are studied. It is shown that overconsumption equilibria -- i.e. equilibria at which consumption exceeds the level maximizing life expectancy -- exist in highly productive economies with a low impatience. We identify also conditions under which there exist long-run cycles in output and longevity around overconsumption equilibria.

Keywords: Longevity; Mortality; Growth; Overconsumption; OLG; model (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Existence and stability of overconsumption equilibria (2011)
Working Paper: Existence and stability of overconsumption equilibria (2011)
Working Paper: Existence and stability of overconsumption equilibria (2011)
Working Paper: Existence and stability of overconsumption equilibria (2009)
Working Paper: Existence and stability of overconsumption equilibria (2009)
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