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On the effects of changing mortality patterns on investment, labour and consumption under uncertainty

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  • Ewald, Christian-Oliver
  • Zhang, Aihua

Abstract

In this paper we extend the consumption–investment life cycle model for an uncertain-lived agent, proposed by Richard (1974), to allow for flexible labour supply. We further study the consumption, labour supply and portfolio decisions of an agent facing age-dependent mortality risk, as presented by UK actuarial life tables spanning the time period from 1951–2060 (including mortality forecasts). We find that historical changes in mortality produce significant changes in portfolio investment (more risk taking), labour (decrease of hours) and consumption level (shift to higher level) contributing up to 5% to GDP growth during the period from 1980 until 2010.

Suggested Citation

  • Ewald, Christian-Oliver & Zhang, Aihua, 2017. "On the effects of changing mortality patterns on investment, labour and consumption under uncertainty," Insurance: Mathematics and Economics, Elsevier, vol. 73(C), pages 105-115.
    • Handle: RePEc:eee:insuma:v:73:y:2017:i:c:p:105-115
    DOI: 10.1016/j.insmatheco.2017.01.008
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    More about this item

    Keywords

    Life-cycles; Portfolio investment; Flexible labour; Age-dependent mortality rates; Uncertain lifetime;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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