Complex dynamics in an OLG model of neoclassical growth with endogenous retirement age and public pensions

Fanti, Luciano; Gori, Luca; Sodini, Mauro

doi:10.1016/j.nonrwa.2012.08.004

Cited by 10 publications

(4 citation statements)

References 78 publications

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“…Thus, a more thoughtful analysis of this real-world insurance problem demands that the volume of business to be modelled as a non-linear function with respect to reserve, the premium, the noise and a quadratic performance criterion concerning the utility function to be implemented. Indeed, there are quite a few examples where non-linear analysis to model different insurance's applications is required (see for instance Kremer, 2004Kremer, , 2006Fanti et al, 2013).…”

Section: Demand For a Non-linear Optimal Control Frameworkmentioning

confidence: 99%

Optimal strategies for a non-linear premium-reserve model in a competitive insurance market

Pantelous

Passalidou

2016

Ann. actuar. sci.

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The calculation of a fair premium is always a challenging topic in the real-world insurance applications. In this paper, a non-linear premium-reserve (P-R) model is presented and the premium is derived by minimising a quadratic performance criterion. The reserve is a stochastic equation, which includes an additive random non-linear function of the state, premium and not necessarily Gaussian noise, which is, however, independently distributed in time, provided only that the mean value and the covariance of the random function is 0 and a quadratic function of the state, premium and other parameters, respectively. In this quadratic representation of the covariance function, new parameters are implemented and enriched further by the previous linear models, such as the income insurance elasticity of demand, the number of insured and the inflation in addition to the company’s reputation. The quadratic utility function concerns the present value of the reserve. Interestingly, for the very first time, the derived optimal premium in a competitive market environment is also dependent on the company’s reserve among the other parameters. Finally, a numerical application illustrates the main findings of the paper.

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Section: Demand For a Non-linear Optimal Control Frameworkmentioning

confidence: 99%

Optimal strategies for a non-linear premium-reserve model in a competitive insurance market

Pantelous

Passalidou

2016

Ann. actuar. sci.

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“…In addition, we assume the existence of a reference level against which consumption of the current generation is compared with. This implies that effective consumption of individuals of generation t is negatively affected by the consumption experience of their parents (a t ), which gives rise to a form of external habits (de la Croix, 1996;Carroll et al, 1997Carroll et al, , 2000de la Croix and Michel, 1999;Gori and Sodini, 2013). It is important to specify that we are considering external habit under the flow concept of it.…”

Section: The Modelmentioning

confidence: 99%

“…The study of growth models that generate endogenous deterministic fluctuations dates back to Grandmont (1985), Farmer (1986), Reichlin (1986), and Azariadis (1993). Subsequently, several other authors have dealt with this topic in OLG models with either exogenous labour supply (Yokoo, 2000) or endogenous labour supply (Nourry, 2001;Nourry and Venditti, 2006) (Some applications of nonlinear dynamics in macroeconomic models can be found in Zhang (1999), Antoci et al (2004), Li (2011, 2013), and Fanti et al (2013)). The works of de la Croix (1996) and de la Croix and Michel (1999) essentially represent the OLG literature related to the present paper.…”

Section: Introductionmentioning

confidence: 99%

Local and global bifurcations in an economic growth model with endogenous labour supply and multiplicative external habits

Gori

Sodini

2014

Chaos: An Interdisciplinary Journal of Nonlinear Science

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This paper analyses the mathematical properties of an economic growth model with overlapping generations, endogenous labour supply, and multiplicative external habits. The dynamics of the economy is characterised by a two-dimensional map describing the time evolution of capital and labour supply. We show that if the relative importance of external habits in the utility function is sufficiently high, multiple (determinate or indeterminate) fixed points and poverty traps can exist. In addition, periodic or quasiperiodic behaviour and/or coexistence of attractors may occur.

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“…This specification is used byChakraborty (2004) for the survival probability. A similar formulation is also used byBlackburn and Cipriani (2002) or byFanti and Gori (2014).9 Although the literature has already modelled the impact of preventive health investment in OLG models with PAYGO pensions (seeChakraborty, 2004;Fanti and Gori, 2011a), to the best of our knowledge, no model has studied the effect of curative health investments in such a framework.…”

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confidence: 99%

Conditioning public pensions on health: effects on capital accumulation and welfare

Fabbri,

Leroux,

Melindi-Ghidi

et al. 2024

J Popul Econ

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This paper develops an overlapping generations model that links a public health system to a pay-as-you-go (PAYG) pension system. It relies on two assumptions. First, the health system directly finances curative health spending on the elderly. Second, public pensions partially depend on health status by introducing a component indexed to society's average level of old-age disability. Reducing the average disability rate in the economy then lowers pension benefits as the need to finance long-term care services also drops. We study the effects of introducing such a 'comprehensive' Social Security system on individual decisions, capital accumulation, and welfare. We first show that health investments can boost savings and capital accumulation under certain conditions. Second, if individuals are sufficiently concerned with their health when old, it is optimal to introduce a health-dependent pension system, as this will raise social welfare compared to a system where pensions are not tied to the society's average level of old-age disability. Our analysis thus highlights an important policy recommendation: making PAYG pension schemes partially health-dependent can be beneficial to society.

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Complex dynamics in an OLG model of neoclassical growth with endogenous retirement age and public pensions

Cited by 10 publications

References 78 publications

Optimal strategies for a non-linear premium-reserve model in a competitive insurance market

Optimal strategies for a non-linear premium-reserve model in a competitive insurance market

Local and global bifurcations in an economic growth model with endogenous labour supply and multiplicative external habits

Conditioning public pensions on health: effects on capital accumulation and welfare

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