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INHERITED TASTES AND ENDOGENOUS LONGEVITY
Published online by Cambridge University Press: 13 June 2017
Abstract
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This article aims at studying a general equilibrium model with overlapping generations that incorporates inherited tastes (aspirations) and endogenous longevity. The existence of standard-of-living aspirations transmitted between two subsequent generations in a context where the individual state of health depends on public investments in health has some remarkable consequences at the macroeconomic level. First, aspirations allow escaping from the well-known poverty trap scenario described by Chakraborty (2004). Second, the steady-state equilibrium may be destabilized through a super-critical Neimark–Sacker bifurcation when the health tax rate is set at too high or too low a level. This causes endogenous fluctuations in income and longevity.
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Footnotes
We gratefully acknowledge that this work has been performed within the activity of the PRIN-2009 project “Structural Change and Growth,” MIUR (Ministry of Education), Italy. We are also indebted to Xavier Raurich, Jaime Alonso-Carrera, and participants at conferences “Structural Change, Dynamics and Economic Growth” held in Livorno, Italy on September 2013 and “International Conference on Applied Business and Economics” held in Manhattan, New York, USA, on October 2013. We are also indebted to two anonymous reviewers for valuable and stimulating comments allowing an improvement in the quality of the work. The usual disclaimer applies. The authors declare that they have no conflict of interest.
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