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Existence and stability of overconsumption equilibria

  • Grégory Ponthière

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))

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