Bhattacharya, Joydeep; Qiao, Xue

Journal of Economic Dynamics and Control Vol. 31 no. 8 (August 2007): 2519-2535. (Originally published as WP #05020, June 2005)

This paper introduces endogenous longevity in an otherwise standard overlapping generations model with capital. In the model, a young agent may increase the length of her old age by incurring investments in health funded from her wage income. Such private health investments are assumed to be more "productive" if accompanied by complementary tax-financed public health programs. The presence of such a complementary public input in private longevity is shown to expose the economy to aggregate endogenous fluctuations and even chaos, and such volatility is impossible in its absence. In particular, the model is capable of generating dramatic reversals in life expectancy as has been observed in many countries.

JEL Classification: E10, J10, O10, O40

Keywords: chaos, longevity, public health

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