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How powerful is demography? The Serendipity Theorem revisited

Author

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  • David de La Croix

    (UCL IRES - Institut de recherches économiques et sociales - UCL - Université Catholique de Louvain = Catholic University of Louvain, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain)

  • Pierre Pestieau

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPR - Center for Economic Policy Research)

  • Grégory Ponthière

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Introduced by Samuelson (Int Econ Rev 16(3):531-538, 1975), the Serendipity Theorem states that the competitive economy will converge towards the optimum steady-state provided the optimum fertility rate is imposed. This paper aims at exploring whether the Serendipity Theorem still holds in an economy with risky lifetime. We show that, under general conditions, including a perfect annuity market with actuarially fair return, imposing the optimum fertility rate and the optimum survival rate leads the competitive economy to the optimum steady state. That Extended Serendipity Theorem is also shown to hold in economies where old adults work some fraction of the old age, whatever the retirement age is fixed or chosen by the agents.

Suggested Citation

  • David de La Croix & Pierre Pestieau & Grégory Ponthière, 2012. "How powerful is demography? The Serendipity Theorem revisited," PSE-Ecole d'économie de Paris (Postprint) halshs-00754584, HAL.
    • Handle: RePEc:hal:pseptp:halshs-00754584
    DOI: 10.1007/s00148-011-0362-z
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    References listed on IDEAS

    as
    1. Blackorby,Charles & Bossert,Walter & Donaldson,David J., 2005. "Population Issues in Social Choice Theory, Welfare Economics, and Ethics," Cambridge Books, Cambridge University Press, number 9780521532587, September.
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    11. Oded Galor & Omer Moav, 2004. "Natural Selection and the Evolution of Life Expectancy," GE, Growth, Math methods 0409004, University Library of Munich, Germany.
    12. de la Croix, David & Ponthiere, Gregory, 2010. "On the Golden Rule of capital accumulation under endogenous longevity," Mathematical Social Sciences, Elsevier, vol. 59(2), pages 227-238, March.
    13. Pierre-André Jouvet & Pierre Pestieau & Gregory Ponthiere, 2010. "Longevity and environmental quality in an OLG model," Journal of Economics, Springer, vol. 100(3), pages 191-216, July.
    14. Abío, G. & Mahieu, G. & Patxot, C., 2004. "On the optimality of PAYG pension systems in an endogenous fertility setting," Journal of Pension Economics and Finance, Cambridge University Press, vol. 3(1), pages 35-62, March.
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    Cited by:

    1. Pierre Pestieau & Gregory Ponthiere, 2017. "Optimal fertility under age-dependent labour productivity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(2), pages 621-646, April.
    2. Gori, Luca & Manfredi, Piero & Sodini, Mauro, 2021. "A Parsimonious Model Of Longevity, Fertility, Hiv Transmission And Development," Macroeconomic Dynamics, Cambridge University Press, vol. 25(5), pages 1155-1174, July.
    3. Pierre Pestieau & Gregory Ponthiere, 2014. "Optimal fertility along the life cycle," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 185-224, January.
    4. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 41-74, March.
    5. Paolo Melindi-Ghidi & Willem Sas, 2015. "Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy," AMSE Working Papers 1525, Aix-Marseille School of Economics, France.
    6. Gregory Ponthiere, 2013. "Fair Accumulation under Risky Lifetime," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(2), pages 210-230, May.
    7. Luciano Fanti & Luca Gori, 2014. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(2), pages 529-564, April.
    8. Thomas I. Renström & Luca Spataro, 2015. "Population Growth and Human Capital: A Welfarist Approach," Manchester School, University of Manchester, vol. 83, pages 110-141, December.
    9. Stelter, Robert, 2014. "Over-aging - Are present human populations too old?," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100334, Verein für Socialpolitik / German Economic Association.
    10. Robert TAMURA & David CUBERES, 2020. "Equilibrium and A-efficient Fertility with Increasing Returns to Population and Endogenous Mortality," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 86(2), pages 157-182, June.
    11. Luciano Fanti & Luca Gori, 2012. "Public Expenditure on Health and Private Old-Age Insurance in an OLG Growth Model with Endogenous Fertility: Chaotic Dynamics Under Perfect Foresight," Computational Economics, Springer;Society for Computational Economics, vol. 40(4), pages 333-353, December.
    12. Cipriani, Giam Pietro & Fioroni, Tamara, 2022. "Social security and endogenous demographic change: child support and retirement policies," Journal of Pension Economics and Finance, Cambridge University Press, vol. 21(3), pages 307-325, July.
    13. repec:hal:pseose:halshs-00746913 is not listed on IDEAS
    14. Ziesemer, Thomas, 2018. "The serendipity theorem for an endogenous open economy growth model," MERIT Working Papers 2018-001, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    15. Stelter, Robert, 2016. "Over-aging — Are present-day human populations too old?," Mathematical Social Sciences, Elsevier, vol. 82(C), pages 116-143.
    16. Momota, Akira & Sakagami, Tomoya & Shibata, Akihisa, 2019. "Reexamination of the Serendipity Theorem from the stability viewpoint," Journal of Demographic Economics, Cambridge University Press, vol. 85(1), pages 43-70, March.
    17. Momota, Akira, 2016. "Intensive and extensive margins of fertility, capital accumulation, and economic welfare," Journal of Public Economics, Elsevier, vol. 133(C), pages 90-110.
    18. Stefan Felder, 2016. "“How powerful is demography? The serendipity theorem revisited” comment on De la Croix et al. (2012)," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(3), pages 957-967, July.

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    More about this item

    Keywords

    Fertility; Mortality; Overlapping generations;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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