Endogenous lifetime, intergenerational mobility and economic development

This paper analyzes the effects of endogenous lifetime on the relationship between intergenerational mobility and economic development in an overlapping generations framework. We assume that an individual’s lifetime depends on health status, which improves with economic development. Increase in lifetime encourages incentives of education investment while decreasing transfer, which is the funding source for education. The dynamics of intergenerational mobility and income inequality depend crucially on lifetime. If an increase in lifetime with economic development is sufficiently small, the mobility monotonically increases while income inequality decreases. However, if lifetime increases rapidly with economic development, the mobility and income inequality exhibit cyclical, and even chaotic behavior. In fact, these various patterns of intergenerational mobility have been observed in developed countries.