Toward a general analysis of endogenous Easterlin cycles: Fid-Bau Portal

Toward a general analysis of endogenous Easterlin cycles

Cyrus Chu, C. Y. / Lu, Huei-Chung

Abstract Easterlin believed that there were two features associated with the birth cycles he observed: the cycles were related to the labor market, and they might be self-generating. This paper tries to set up a model that contains both of these two features. We suppose that the welfare of various age-specific cohorts are determined by their respective marginal productivity, and that the underlying technology which puts together labor force of various age-specific cohorts can be characterized by a general production function. Under these weak assumptions, we show that the well-analyzed cohort and period models along the lines of Lee (1974) are restricted versions of our general setting. Given that both the cohort model and the period model were rejected by statistical tests, we adopt the coefficient values obtained from the estimation of the unrestricted version to perform the bifurcation analysis. We go beyond the previous study which focused upon the possible existence of limit cycles, and show that the U. S. fertility limit cycle solution is unstable. Therefore the population trajectory will never converge to that limit cycle.