Indeterminacy, intergenerational redistribution, endogenous longevity and human capital accumulation

Giam Pietro Cipriani and Miltiadis Makris

No 401, Discussion Papers from University of Exeter, Department of Economics

Abstract: This paper sets up an OLG economy with endogenous life expectancy to study how fiscal policy that redistributes between generations can open the door to sunspot equilibria. Agents invest independently in their own human capital, produce and consume output, and receive a pension upon retirement. The model produces an expectations coordination problem that can explain significant differences in growth paths followed by otherwise identical countries. In particular, we show that our economy may be characterised by local indeterminacy of dynamic equilibria, and hence feature fluctuations which are driven by extrinsic uncertainty.

Keywords: Endogenous Longevity; Human Capital; Intergenerational Redistribution; Local Indeterminacy; Sunspots. (search for similar items in EconPapers)
JEL-codes: E60 H30 J18 J24 O40 (search for similar items in EconPapers)
Date: 2004
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Journal Article: Indeterminacy, intergenerational redistribution, endogenous longevity and human capital accumulation (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:0401

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