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Existence and stability of overconsumption equilibria

  • Grégory Ponthière

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

Growth models with endogenous mortality assume generally that life expectancy is increasing with output per capita, and, thus, with individual consumption, whatever the consumption level is. However, empirical evidence on the effect of overconsumption and obesity on mortality tends to question that postulate. This paper develops a two-period OLG model where life expectancy is a non-monotonic function of consumption. 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. Stability analysis highlights conditions under which there exist non-converging cycles in output and longevity around overconsumption equilibria.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00575015.

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Date of creation: Oct 2009
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Handle: RePEc:hal:psewpa:halshs-00575015
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