Figure 3 - uploaded by Luca Gori
Content may be subject to copyright.
Source publication
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 ma...
Contexts in source publication
Context 2
... explain how a period-doubling cascade initiates and then reverses, it is useful to examine together the graph of the phase map (Eq. 10) -see Figure 1 -and the corresponding bifurcation diagram Figure 3 for different values of the parameter d . The map has a flattened plateau region for small capital stocks and a plateau region that flattens out for large capital stocks. ...
Citations
... The study of problems of the interrelationship between health and macroeconomics-notably, income per person-has gained popularity in both the empirical and theoretical literatures, 4 since the state of health of humans may affect economic behaviours: the role played by health on both the ability to work and productivity of work (see [21]); the relationship between adult mortality and private and/or public health spending (see [1,[22][23][24][25][26]); the relationship between adult mortality and the accumulation of human capital due to changes in investments in education (see [27]). ...
We analyse the steady-state equilibrium dynamics of the conventional overlapping generations economy à la Diamond (1965) with pay-as-you-go public pensions and second period of life divided between working and retirement time in a proportion dependent on the individual health status (a rather realistic assumption especially in the current world with high longevity). In contrast to an economy without public health spending – which is always stable with monotonic trajectories –, an economy with tax-financed health care services (which in turn affect the individual health status and hence the length of the retirement time) may experience complex equilibrium dynamics with deterministic chaotic business cycles and, in particular, complicated dynamical phenomena, such as multiple “bubblings” may occur when crucial economic parameters change. Interestingly, it is shown that increasing the size of PAYG pensions, although initially may trigger chaotic cycles, eventually works for stability.
Since increasing attention is paid to consider the macroeconomic effects of the increasing longevity, we study an overlapping-generations model with endogenous fertility to investigate the steady-state and dynamic effects (with static expectations) of two historical alternatives as a means of old-age insurance: voluntary intra-family transfers from young to old members versus pay-as-you-go public pensions. We show that the change from a private system of old-age insurance to a public system of social security has favoured the rise in capital accumulation while also reducing cyclical instability in countries where longevity is large enough. In contrast, when adult mortality is high such a change makes an economy with public pensions more prone to be subject to fluctuations, while also reducing the steady-state stock of capital and GDP per worker. In addition, since the old-age insurance motive seems to prevail also in developed countries with long-lived individuals such as Italy, our results may also be of interest for pension policies.
