Existence and stability of overconsumption equilibria

Pre-print, Working paper: 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.

Author(s)

Grégory Ponthière

Date of publication
  • 2009
Keywords JEL
E13 E21 I12
Keywords
  • Longevity
  • Growth
  • Overconsumption
  • Obesity
  • OLG model
Internal reference
  • PSE Working Papers n°2009-38
Version
  • 1