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Existence and stability of overconsumption equilibria

Author

Listed:
  • Grégory Ponthière

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Growth models with endogenous mortality assume generally that life expectancy is increasing with output per capita and, thus, with individual consumption, whatever its level is. However, empirical evidence supports a U-shaped relationship between consumption and mortality, implying that the monotonicity of that relation is local but not global. This paper develops a two-period OLG model where life expectancy is a non-monotone function of consumption, and where agents form myopic anticipations about life expectancy. The existence, uniqueness and stability of steady-state equilibria are studied. It is shown that overconsumption equilibria -- i.e. equilibria at which consumption exceeds the level maximizing life expectancy -- exist in highly productive economies with a low impatience. We identify also conditions under which there exist long-run cycles in output and longevity around overconsumption equilibria.

Suggested Citation

  • Grégory Ponthière, 2011. "Existence and stability of overconsumption equilibria," Post-Print halshs-00754548, HAL.
    • Handle: RePEc:hal:journl:halshs-00754548
    DOI: 10.1016/j.econmod.2010.09.022
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    Cited by:

    1. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 41-74, March.
    2. Gahramanov, Emin, 2013. "Survival misperception, time inconsistency, and implications for life-cycle saving and welfare," Economic Modelling, Elsevier, vol. 32(C), pages 539-550.
    3. Naimzada, Ahmad & Pireddu, Marina, 2018. "An evolutive discrete exchange economy model with heterogeneous preferences," Chaos, Solitons & Fractals, Elsevier, vol. 111(C), pages 35-43.
    4. Naimzada, Ahmad & Pireddu, Marina, 2016. "Endogenous evolution of heterogeneous consumers preferences: Multistability and coexistence between groups," Economics Letters, Elsevier, vol. 142(C), pages 22-26.

    More about this item

    Keywords

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    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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