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Non-Existence of Steady State Equilibrium in the Neoclassical Growth Model with a Longevity Trend

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  • Mikkel Nørlem Hermansen

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    (Department of Economics and Business, Aarhus University, Denmark)

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    Abstract

    Longevity has been increasing in the developed countries for almost two centuries and further increases are expected in the future. In the neoclassical growth models the case of population growth driven by fertility is well-known, whereas the properties of population growth caused by persistently declining mortality rates have received little attention. Furthermore, the economic literature on the consequences of changing longevity has relied almost entirely on analysis applying a once and for all change in the survival probability. This paper raises concern about such an approach of comparison of steady state equilibrium when considering the empirically observed trend in longevity. We extend a standard continuous time overlapping generations model by a longevity trend and are thereby able to study the properties of mortality-driven population growth. This turns out to be exceedingly complicated to handle, and it is shown that in general no steady state equilibrium exists. Consequently analytical results and long run implications cannot be obtained in a setting with a realistic demographic setup.

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    Bibliographic Info

    Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2011-04.

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    Length: 24
    Date of creation: 18 Apr 2011
    Date of revision:
    Handle: RePEc:aah:aarhec:2011-04

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    Web page: http://www.econ.au.dk/afn/

    Related research

    Keywords: Longevity; Population growth; Overlapping generations models; Steady state equilibrium; Existence;

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    1. d'Albis, Hippolyte, 2007. "Demographic structure and capital accumulation," Journal of Economic Theory, Elsevier, vol. 132(1), pages 411-434, January.
    2. repec:ebl:ecbull:v:9:y:2004:i:3:p:1-10 is not listed on IDEAS
    3. Rosa Aísa & Fernando Pueyo, 2004. "Endogenous longevity, health and economic growth: a slow growth for a longer life?," Economics Bulletin, AccessEcon, vol. 9(3), pages 1-10.
    4. D. Gale Johnson, 2000. "Population, Food, and Knowledge," American Economic Review, American Economic Association, vol. 90(1), pages 1-14, March.
    5. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers 12378, Iowa State University, Department of Economics.
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