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Choosing Longevity with Overlapping Generations

Author

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  • Weichun Chen
  • Merwan Engineer
  • Ian King

Abstract

We extend Diamond’s (1965) OLG model to allow agents to choose whether to participate in the second period of life. The valuation of early exit (x) is a key parameter. We characterize competitive equilibria, efficient allocations, and predictions for income and life expectancy over time. We find that, with logarithmic utility, for any value of x, there is a range of initial values of the capital stock for which some agents would prefer to exit in equilibrium. The shape of the transition function and the number of steady state equilibria depend crucially on the value of capital’s share of income.

Suggested Citation

  • Weichun Chen & Merwan Engineer & Ian King, 2007. "Choosing Longevity with Overlapping Generations," Department of Economics - Working Papers Series 1002, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1002
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    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0007/802825/1002.pdf
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    References listed on IDEAS

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    3. Kalemli-Ozcan, Sebnem, 2002. "Does the Mortality Decline Promote Economic Growth?," Journal of Economic Growth, Springer, vol. 7(4), pages 411-439, December.
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    5. Zsolt Becsi, 2001. "Longevity and the Life Cycle," Departmental Working Papers 2001-12, Department of Economics, Louisiana State University.
    6. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers Archive 12378, Iowa State University, Department of Economics.
    7. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    8. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
    9. repec:rus:hseeco:71105 is not listed on IDEAS
    10. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-782, August.
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    Cited by:

    1. Driouchi, Ahmed & Boboc, Cristina & Zouag, Nada, 2009. "Interdependencies of Health, Education and Poverty: The Case of South Mediterranean Economies/Interdependencias de salud, educación y pobreza: el caso de las Economías Sur-Mediterráneas," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 27, pages 523-544, Agosto.

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    More about this item

    Keywords

    ndogenous longevity; overlapping generations; growth;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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