Intergenerational Trade, Longevity, and Economic Growth

32 Pages Posted: 7 Feb 2007  

Isaac Ehrlich

State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)

Francis T. Lui

Hong Kong University of Science and Technology

Abstract

We develop an overlapping-generations model of endogenous growth in which human capital is the engine of growth and the generations are linked through material and emotional interdependencies within the family. Parents invest in their children to achieve both old-age support (care) and emotional gratification, and material support from children is determined through self-enforcing implicit contracts. We show that optimal intergenerational trade can then lead to maximization of growth opportunities. Our model produces a theory of the demographic transition linking longevity, fertility, and economic growth. We also show that while population aging may raise the growth rate, an increase in young- ge longevity is likely to produce a greater increase in the growth rate and a reduction in the fertility rate in a growth equilibrium. These predictions and the model's implications concerning the behavior of private savings during the takeoff period appear consistent with empirical evidence.

Suggested Citation

Ehrlich, Isaac and Lui, Francis T., Intergenerational Trade, Longevity, and Economic Growth. Journal of Political Economy, Vol. 99, No. 5, pp. 1029-59, October 1991. Available at SSRN: https://ssrn.com/abstract=961465

Isaac Ehrlich (Contact Author)

State University of New York at Buffalo - Department of Economics ( email )

415 Fronczak Hall
Buffalo, NY 14260
United States
716-645 2121 (Phone)
716-645 2127 (Fax)

HOME PAGE: http://economics.buffalo.edu/people/ehrlich/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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University of Chicago - University of Chicago Press ( email )

1427 E. 60th Street
Chicago, IL 60637
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Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Francis Tingming Lui

Hong Kong University of Science and Technology ( email )

Clear Water Bay
Kowloon, Hong Kong
China
852-2358 7606 (Phone)
852-2358 2084 (Fax)

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