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On the Golden Rule of capital accumulation under endogenous longevity

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  • David, DE LA CROIX

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

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, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2008032.

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Date of creation: 01 Dec 2008
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Handle: RePEc:ctl:louvec:2008032

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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 9780521001151.
  2. David de la Croix & Omar Licandro, 2009. "“The Child is Father of the Man:” Implications for the Demographic Transition," Working Papers 376, Barcelona Graduate School of Economics.
  3. Robert E. Hall & Charles I. Jones, 2004. "The Value of Life and the Rise in Health Spending," NBER Working Papers 10737, National Bureau of Economic Research, Inc.
  4. Kevin M. Murphy & Robert H. Topel, 2006. "The Value of Health and Longevity," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 871-904, October.
  5. Mausumi Das & Shankha Chakraborty, 2010. "Mortality, Human Capital and Persistent Inequality," Working Papers id:2365, eSocialSciences.
  6. Charles I. Jones, . "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," Working Papers 99008, Stanford University, Department of Economics.
  7. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  8. Robert Tamura, 2002. "Human capital and economic development," Working Paper 2002-5, Federal Reserve Bank of Atlanta.
  9. Shone,Ronald, 2002. "Economic Dynamics," Cambridge Books, Cambridge University Press, number 9780521017039.
  10. 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).
  11. 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.
  12. 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.
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