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On the Golden Rule of capital accumulation under endogenous longevity

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  • DE LA CROIX, David

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • PONTHIÈRE, Grégory

Abstract

This note derives the Golden Rule of capital accumulation in a Chakraborty-type economy, i.e. a two-period OLG economy where longevity is endogenous. It is shown that the capital per worker maximizing steady-state consumption per head is inferior to the Golden Rule capital level prevailing under exogenous longevity. We characterize also the Lifetime Golden Rule, that is, the capital per worker maximizing steady-state expected lifetime consumption per head, and show that this tends to exceed the standard Golden Rule capital level.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2008049.

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Date of creation: 01 Aug 2008
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Handle: RePEc:cor:louvco:2008049

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Keywords: Golden Rule; longevity; OLG models.;

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  1. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428, April.
  2. Kevin M. Murphy & Robert H. Topel, 2005. "The Value of Health and Longevity," NBER Working Papers 11405, National Bureau of Economic Research, Inc.
  3. Shankha Chakraborty & Mausumi Das, 2005. "Mortality, Human Capital and Persistent Inequality," Journal of Economic Growth, Springer, vol. 10(2), pages 159-192, 06.
  4. Robert E. Hall & Charles I. Jones, 2005. "The value of life and the rise in health spending," Proceedings, Federal Reserve Bank of San Francisco.
  5. Charles I. Jones, . "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," Working Papers 99008, Stanford University, Department of Economics.
  6. de la Croix, David & Licandro, Omar, 2007. "‘The Child is Father of the Man:’ Implications for the Demographic Transition," CEPR Discussion Papers 6493, C.E.P.R. Discussion Papers.
  7. Cervellati, Matteo & Sunde, Uwe, 2005. "Human capital formation, life expectancy, and the process of development," Munich Reprints in Economics 20083, University of Munich, Department of Economics.
  8. Tamura, Robert, 2006. "Human capital and economic development," Journal of Development Economics, Elsevier, vol. 79(1), pages 26-72, February.
  9. Matteo Cervellati & Uwe Sunde, 2005. "Human Capital Formation, Life Expectancy, and the Process of Development," American Economic Review, American Economic Association, vol. 95(5), pages 1653-1672, December.
  10. Shankha Chakraborty, 2002. "Endogenous Lifetime and Economic Growth," University of Oregon Economics Department Working Papers 2002-03, University of Oregon Economics Department, revised 26 Jan 2002.
  11. BOUCEKKINE, Raouf & DIENE, Bity & AZOMAHOU, Théophile, . "Growth economics of epidemics: A review of the theory," CORE Discussion Papers RP -2004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Shone,Ronald, 2002. "Economic Dynamics," Cambridge Books, Cambridge University Press, number 9780521017039, April.
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