An OLG Model of Endogenous Growth and Ageing

Paper number: 01/02

Paper date: May 10, 2001

Year: 2001

Paper Category: Working Paper

Authors

Giam Pietro Cipriani and Miltos Makris

Abstract

To study fully endogenous ageing alongside growth and their implications, this paper sets up an OLG economy in which the life expectancy of agents is endogenous. Agents are bearers of children, investors in education and producers and consumers of output. Retirement decision in the last period of life is also endogenous and, when retired, agents receive a pension that is financed by a PAYG system. The model features a unique asymptotically stable steady state. Accordingly it supports a plethora of short and medium-run dynamic paths to a uniquely defined long-run equilibrium depending on the functional forms, parameters and initial conditions. The model is then calibrated and some comparative static experiments on the effect of policy variables changes are conducted.

An OLG Model of Endogenous Growth and Ageing An OLG Model of Endogenous Growth and Ageing