Longevity, fertility and Demographic Transition in an OLG model.

The paper investigates the effects of declining mortality on fertility and income in the standard OLG neoclassical growth model under the assumptions of accidental bequests as well as fully annuitised savings. It is shown whether and how different countries may expect increasing or decreasing fertility rates under increasing longevity, and argued that mortality decline may be another explanation of the Demographic Transition process. In particular, the fact that some countries have completed the process while others are entrapped in the second stage may depend on the initial level of mortality as well as on differences in technology and preferences. It is also argued that the third stage may not necessarily occur in some less developed countries even if their mortality rates converge towards those of industrialised countries.longevity

Public health spending, old-age productivity and economic growth: chaotic cycles under perfect foresight

This paper analyses the dynamics of a double Cobb-Douglas economy with overlapping generations and public health investments that affect the supply of efficient labour of the old-aged. It is shown that the positive steady state of the economy is unique. Moreover, we provide necessary and sufficient conditions for the emergence of endogenous deterministic complex cycles when individuals are perfect foresighted. Interestingly, the equilibrium dynamics shows rather complicated phenomena such as a multiplicity of period-bubbling.OLG model; Productivity; Perfect foresight; Public health expenditure

Profits and Competition in a Unionized Duopoly Model with Product Differentiation and Labour Decreasing Returns

In this paper, we aim at investigating if the conventional wisdom, that an increase of competition linked to a decrease in the degree of product differentiation always reduces firms’ profits, remains true in a unionized duopoly model with labour decreasing returns. In this context, mixed results emerge. In particular, we show that a decrease in the degree of product differentiation may affect wages, hence profits, differently, depending on both the mode of competition in the product market (Cournot or Bertrand competition) and the particular unionization structure (firm-specific or industry-wide union(s)). Interestingly, it is shown that the conventional wisdom can actually be reversed, even if under Bertrand competition only.unionized duopoly, labour decreasing returns, product differentiation, profits

Differentiated Duopoly and Horizontal Merger Profitability under Monopoly Central Union and Convex Costs

Can a merger from duopoly to monopoly be detrimental for profits? This paper deals with this issue by focusing on the interaction between decreasing returns to labour (which imply firms’ convex production costs) and centralised unionisation in a differentiated duopoly model. It is pointed out that the wage fixed by a monopoly central union in the post-merger case is higher than in the pre-merger/Cournot equilibrium, opening up the possibility that merger reduces profits. Indeed, it is shown that this “reversal result” actually applies when the central union is sufficiently little interested to wages with respect to employment. Moreover, the lower the degree of substitutability between firms’ products and the higher the workers’ reservation wage, the higher ceteris paribus the probability that profits decrease as a result of the merger.merger profitability, unionised duopoly, convex costs

Endogenous fertility and development traps with endogenous lifetime

We extend the literature on endogenous lifetime and economic growth by Chakraborty (2004) and Bunzel and Qiao (2005) to endogenous fertility. It is shown that development traps due to under investments in health can never appear when fertility is an economic decision variable.Endogenous fertility; Health; Life expectancy; OLG model

Labour Incentive Schemes in a Cournot Duopoly with Simple Institutional Constraints

This paper studies equilibrium incentive contracts in a Cournot duopoly, in which institutional arrangements constrain firms to pay (risk-neutral) workers a given salary. In this context, performance-related-pay (PRP) and relative performance evaluation (RPE) are compared in terms of resulting levels of workers' effort (firms' expected output), market price, profits, consumer surplus and social welfare. It is shown that, while under principal-agent standard assumptions (i.e. all wage components are "freely" negotiated by each firm-worker pair) PRP and RPE are equivalent, in the presence of institutional "frictions", RPE outperforms PRP in relation to output, profits, consumer surplus and social welfare. Moreover, RPE also permits to replicate results obtained without institutional constraints, even if the mechanism driving final outcomes is very different.Cournot duopoly, principal-agent model, relative performance evaluation, institutional constraints

Monopoly union, unemployment benefits and labour taxes: The unemployment problem revisited

Unemployment is undoubtedly one of the most important concerns in developed countries, especially in Europe. Most of the related economic literature has discussed the possible influence of unemployment benefits on unemployment and welfare, assuming a lump-sum type benefit system, while the more realistic earnings-related (replacement rate) regime has been scarcely considered. Applying a fairly standard monopoly union model, we show that when unemployment benefit is related to the existing wage, the rate of unemployment can be reduced by increasing both the replacement rate and the labour tax.

A two-sector OLG economy: economic growth and demographic behaviour

We analyse an overlapping generations economy with two sectors of production: a capital-intensive commodity sector and a labour-intensive services sector. First, we consider an economy with exogenous population and study the effects of a change in the individual preference for old-aged services that causes a reallocation of labour between sectors on per capita income. Then, we compare the results with the standard Diamond (1965) style one-sector economy. Second, we endogenise fertility founding that a reallocation of labour in favour of the services sector causes an additional beneficial effect on per capita income with respect to the model with exogenous population. Third, we further introduce endogenous lifetime through public health investments, showing that multiple regimes of development may exist. In this context, the a rise in the preference for old-aged services may help escaping from poverty.Fertility, Life expectancy; OLG model; Public health expenditure; Services market

Fertility and PAYG pensions in the overlapping generations model

This article analyses how long-run pay-as-you-go public pensions react to a change in fertility in the basic overlapping generations model of neoclassical growth. While it would seem well established both in the academic and political debates that the decline in fertility represents a “demographic time bomb” for the sustainability of public pensions, it is shown that a falling birth rate need not necessarily cause long-run pension benefit to fall.Fertility; PAYG pensions; OLG model

Endogenous fertility, endogenous lifetime and economic growth: the role of child policies

We examine the effects of child policies on both the transitional dynamics and long-run demo-economic outcomes in the conventional overlapping generations model of neoclassical growth extended with endogenous longevity and endogenous fertility. The government invests in public health (Chakraborty, 2004) and the individual survival probability at the end of youth depends on health expenditure through an S-shaped longevity function. This may give rise to four steady states and, hence, development traps are possible. However, poverty or prosperity may not depend on initial conditions, while being the result of a child policy design. In particular, a child tax can be used to effectively allow those economies that were entrapped into poverty to prosper irrespective of where they start from.Child policy; Endogenous fertility; Health; Life expectancy; OLG model