Skip to main content
×
Home

INHERITED TASTES AND ENDOGENOUS LONGEVITY

  • Luciano Fanti (a1), Luca Gori (a2), Cristiana Mammana (a3) and Elisabetta Michetti (a3)
Abstract

This article aims at studying a general equilibrium model with overlapping generations that incorporates inherited tastes (aspirations) and endogenous longevity. The existence of standard-of-living aspirations transmitted between two subsequent generations in a context where the individual state of health depends on public investments in health has some remarkable consequences at the macroeconomic level. First, aspirations allow escaping from the well-known poverty trap scenario described by Chakraborty (2004). Second, the steady-state equilibrium may be destabilized through a super-critical Neimark–Sacker bifurcation when the health tax rate is set at too high or too low a level. This causes endogenous fluctuations in income and longevity.

Copyright
Corresponding author
Address correspondence to: Luca Gori, Department of Political Science, University of Genova, Piazzale E. Brignole, 3a, I-16125 Genova (GE), Italy; e-mails: luca.gori@unige.it, dr.luca.gori@gmail.com.
Footnotes
Hide All

We gratefully acknowledge that this work has been performed within the activity of the PRIN-2009 project “Structural Change and Growth,” MIUR (Ministry of Education), Italy. We are also indebted to Xavier Raurich, Jaime Alonso-Carrera, and participants at conferences “Structural Change, Dynamics and Economic Growth” held in Livorno, Italy on September 2013 and “International Conference on Applied Business and Economics” held in Manhattan, New York, USA, on October 2013. We are also indebted to two anonymous reviewers for valuable and stimulating comments allowing an improvement in the quality of the work. The usual disclaimer applies. The authors declare that they have no conflict of interest.

Footnotes
References
Hide All
Alonso-Carrera J., Caballé J. and Raurich X. (2004) Consumption externalities, habit formation and equilibrium efficiency. Scandinavian Journal of Economics 106, 231251.
Alonso-Carrera J., Caballé J. and Raurich X. (2005) Growth, habit formation, and catching up with the Joneses. European Economic Review 49, 16651691.
Alonso-Carrera J., Caballé J. and Raurich X. (2007) Aspirations, habit formation, and bequest motive. Economic Journal 117, 813836.
Artige L., Camacho C. and de la Croix D. (2004) Wealth breeds decline: reversals of leadership and consumption habits. Journal of Economic Growth 9, 423449.
Ashraf Q. and Galor O. (2013) The ‘out of Africa’ hypothesis, human genetic diversity, and comparative economic development. American Economic Review 103, 146.
Becker G. S. (1992) Habits, addictions and traditions. Kyklos 45, 327345.
Blackburn K. and Cipriani G. P. (2002) A model of longevity, fertility and growth. Journal of Economic Dynamics & Control 26, 187204.
Caballé J. and Moro-Egido A. I. (2014) Effects of aspirations and habits on the distribution of wealth. Scandinavian Journal of Economics 116, 10121043.
Cervellati M. and Sunde U. (2011) Life expectancy and economic growth: the role of the demographic transition. Journal of Economic Growth 16, 99133.
Cervellati M. and Sunde U. (2013) Life expectancy, schooling, and lifetime labor supply: theory and evidence revisited. Econometrica 81, 20552086.
Chakraborty S. (2004) Endogenous lifetime and economic growth. Journal of Economic Theory 116, 119137.
de la Croix D. (1996) The dynamics of bequeathed tastes. Economics Letters 53, 8996.
de la Croix D. (2001) Growth dynamics and education spending: the role of inherited tastes and abilities. European Economic Review 45, 14151438.
de la Croix D. and Michel P. (1999) Optimal growth when tastes are inherited. Journal of Economic Dynamics and Control 23, 519537.
de la Croix D. and Michel P. (2002) A Theory of Economic Growth: Dynamics and Policy in Overlapping Generations. Cambridge, UK: Cambridge University Press.
Diamond P. A. (1965) National debt in a neoclassical growth model. American Economic Review 55, 11261150.
Ehrlich I. (2000) Uncertain lifetime, life protection, and the value of life saving. Journal of Health Economics 19, 341367.
Fanti L. and Gori L. (2013) Fertility-related pensions and cyclical instability. Journal of Population Economics 26, 12091232.
Fanti L. and Gori L. (2014) Endogenous fertility, endogenous lifetime and economic growth: the role of child policies. Journal of Population Economics 27, 529564.
Fanti L., Gori L., Mammana C. and Michetti E. (2016) Complex Dynamics in an OLG Model of Growth with Inherited Tastes. MPRA working paper no. 69906.
Farmer R. E. A. (1986) Deficits and cycles. Journal of Economic Theory 40, 7786.
Fioroni T. (2010) Child mortality and fertility: public vs private education. Journal of Population Economics 23, 7397.
Fogel R. W. (2004) The Escape from Hunger and Premature Death. New York, NY: Cambridge University Press.
Galor O. (2005) From stagnation to growth: unified growth theory. In Aghion P. and Durlauf S. (eds.), Handbook of Economic Growth, pp. 171293. Amsterdam: Elsevier.
Galor O. (2011) Unified Growth Theory. Princeton, NJ: Princeton University Press.
Galor O. (2012) The demographic transition: causes and consequences. Cliometrica, Journal of Historical Economics and Econometric History 6, 128.
Galor O. and Moav O. (2002) Natural selection and the origin of economic growth. Quarterly Journal of Economics 117, 11331191.
Galor O. and Özak Ö. (2016) The agricultural origins of time preference. American Economic Review 106, 30643103.
Galor O. and Weil D. N. (2000) Population, technology, and growth: from Malthusian stagnation to the Demographic Transition and beyond. American Economic Review 90, 806828.
Gollin D. (2002) Getting income shares right. Journal of Political Economy 110, 458474.
Gómez M. A. (2015) Equilibrium dynamics in an endogenous growth model with habit formation and elastic labor supply. Macroeconomic Dynamics 19, 618642.
Gori L. and Michetti E. (2016) The dynamics of bequeathed tastes with endogenous fertility. Economics Letters 149, 7982.
Grandmont J. M. (1985) On endogenous competitive business cycles. Econometrica 53, 9951045.
Grandmont J. M., Pintus P. and de Vilder R. (1998) Capital-labor substitution and competitive nonlinear endogenous business cycles. Journal of Economic Theory 80, 1459.
Hall R. E. and Jones C. I. (2007) The value of life and the rise in health spending. Quarterly Journal of Economics 122, 3972.
Ikefuji M. and Mino K. (2009) Internal vs. External Habit Formation in a Growing Economy with Overlapping Generations. ISER discussion paper no. 750, Osaka University.
Kaneko A., Kato H., Shinozaki T. and Yanagihara M. (2016) Bequeathed tastes and fertility in an endogenous growth model. Economics Bulletin 36, 14221429.
Leung M. C. M. and Wang Y. (2010) Endogenous health care, life expectancy and economic growth. Pacific Economic Review 15, 1131.
Livi-Bacci M. (2006) A Concise History of World Population, 4th ed. Malden, MA: Wiley-Blackwell.
Lorentzen P., McMillan J. and Wacziarg R. (2008) Death and development. Journal of Economic Growth 13, 81124.
Michel P. and de la Croix D. (2000) Myopic and perfect foresight in the OLG model. Economics Letters 67, 5360.
Nakamura H. and Mihara Y. (2016) Effect of public health investment on economic development via savings and fertility. Macroeconomic Dynamics 20, 13411358.
Raut L. K. and Srinivasan T. N. (1994) Dynamics of endogenous growth. Economic Theory 4, 770790.
Reichlin P. (1986) Equilibrium cycles in an overlapping generations economy with production. Journal of Economic Theory 40, 89102.
Schäfer A. and Valente S. (2011) Habit formation, dynastic altruism and population dynamics. Macroeconomic Dynamics 15, 365397.
Weil D. N. (2007) Accounting for the effect of health on economic growth. Quarterly Journal of Economics 122, 12651306.
World Bank (2015) World Development Indicators Database. Washington D.C., US: World Bank.
World Health Statistics (2015) Part II. Global Health Indicators. Switzerland: WHO Press.
Yasui D. (2016) Adult longevity and growth takeoff. Macroeconomic Dynamics 20, 165188.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords:

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 27 *
Loading metrics...

Abstract views

Total abstract views: 100 *
Loading metrics...

* Views captured on Cambridge Core between 13th June 2017 - 21st November 2017. This data will be updated every 24 hours.