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Public expenditure on health and private old-age insurance in an OLG growth model with endogenous fertility: chaotic cycles under perfect foresight

  • Fanti, Luciano
  • Gori, Luca

This paper analyses the dynamics of a simple overlapping generations economy with endogenous longevity, endogenous fertility and private transfers from children to parents. In this context, it is shown that both the public provision of health care services, which determines the individual length of life, and the size of the intra-family transfer may be a source of chaotic cycles when individuals are perfect foresighted. However, such economic factors also have the potential to ultimately suppress undesirable chaotic fluctuations. This suggests that the equilibrium dynamics of an OLG growth model may endogenously reconcile the existence of both irregular business cycles and the global stability of the economic system.

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File URL: http://mpra.ub.uni-muenchen.de/23697/1/MPRA_paper_23697.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23697.

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Date of creation: 06 Jul 2010
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Handle: RePEc:pra:mprapa:23697
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  7. Luciano Fanti & Luca Gori, 2009. "Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies," Discussion Papers 2009/91, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  8. Reichlin, Pietro, 1986. "Equilibrium cycles in an overlapping generations economy with production," Journal of Economic Theory, Elsevier, vol. 40(1), pages 89-102, October.
  9. Zhang, Junsen & Nishimura, Kazuo, 1993. "The old-age security hypothesis revisited," Journal of Development Economics, Elsevier, vol. 41(1), pages 191-202, June.
  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. GRANDMONT, Jean-Michel & PINTUS, Patrick & de VILDER, Robin, 1997. "Capital-labor substitution and competitive nonlinear endogenous business cycles," CORE Discussion Papers 1997087, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  17. Berthold U. Wigger, 1999. "Pay-as-you-go financed public pensions in a model of endogenous growth and fertility," Journal of Population Economics, Springer, vol. 12(4), pages 625-640.
  18. Michael C.M. Leung & Yong Wang, 2010. "Endogenous Health Care, Life Expectancy And Economic Growth," Pacific Economic Review, Wiley Blackwell, vol. 15(1), pages 11-31, 02.
  19. van Groezen, Bas & Leers, Theo & Meijdam, Lex, 2003. "Social security and endogenous fertility: pensions and child allowances as siamese twins," Journal of Public Economics, Elsevier, vol. 87(2), pages 233-251, February.
  20. Eckstein, Zvi & Wolpin, Kenneth I., 1985. "Endogenous fertility and optimal population size," Journal of Public Economics, Elsevier, vol. 27(1), pages 93-106, June.
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  23. Cazzavillan, Guido, 2001. "Indeterminacy and Endogenous Fluctuations with Arbitrarily Small Externalities," Journal of Economic Theory, Elsevier, vol. 101(1), pages 133-157, November.
  24. K Blackburn & H Issa, 2002. "Endogenous Life Expectancy in a Simple Model of Growth," The School of Economics Discussion Paper Series 0217, Economics, The University of Manchester.
  25. Tamara Fioroni, 2010. "Optimal savings and health spending over the life cycle," The European Journal of Health Economics, Springer, vol. 11(4), pages 355-365, August.
  26. Bas van Groezen & L. Meijdam, 2004. "Growing Old and Staying Young: Population Policy in an Ageing Closed Economy," Working Papers 04-28, Utrecht School of Economics.
  27. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers 12378, Iowa State University, Department of Economics.
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