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Life cycles with Endogenous Time Allocation and Age-Dependent Mortality

Author

Listed:
  • Manuel Guerra
  • João Pereira
  • Miguel St. Aubyn

Abstract

The negative effect of population aging on the economy can be mitigated by a behavioral effect of people as a reaction to a higher life expectancy. We analyze the optimal life-cycle of individuals that allocate time at the intensive margin between leisure, human capital accumulation, and labor supply while facing an age-dependent mortality. This allows to enhance effects of changes in life expectancy on labor supply and human capital accumulation and to uncover trade-offs between time allocations at different stages of the life-cycle. Our life-cycles are characterized by on the job training throughout all the working life with a possibility of a temporary exit from the labor market. We simulate the model numerically and nd that with a higher life expectancy, labor supply increases at the intensive margin and the individual invests more in human capital. We also nd a willingness to increase labor supply at the extensive margin.

Suggested Citation

  • Manuel Guerra & João Pereira & Miguel St. Aubyn, 2018. "Life cycles with Endogenous Time Allocation and Age-Dependent Mortality," Working Papers REM 2018/56, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp0562018
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    File URL: https://rem.rc.iseg.ulisboa.pt/wps/pdf/REM_WP_056_2018.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Life-Cycle; Age-Dependent Mortality; Aging; Time Allocation;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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