Advanced Search
MyIDEAS: Login

Population ageing and intertemporal consumption: Representative agent versus social planner

Contents:

Author Info

  • Creedy, John
  • Guest, Ross

Abstract

This paper examines the optimal path of consumption over time in the context of population ageing. Older age groups are considered to have relatively greater 'needs', resulting for example from additional health costs. These differences give rise to the concept of the 'equivalent number of persons', as distinct from the population size. Emphasis is given to the difference between a framework involving a representative agent and one in which plans are made by a social planner. The precise conditions under which consumption growth paths are the same under the representative agent and the social planner are established. This equivalence is found to hold only in the case where the social planner's value judgements are such that individuals are considered to be the appropriate unit of analysis. An alternative assumption, in which equivalent persons are regarded as the appropriate units, is found to give rise to a different optimal consumption path. Numerical examples demonstrate the relative orders of magnitude for a range of parameter values. The differences are found to be potentially important. The choice of appropriate consumption units - individuals or equivalent persons - is far from arbitrary since it involves possibly conflicting value judgements. This choice has implications for policies designed to influence the optimal saving rate, such as superannuation policy and the fiscal balance.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VB1-4PKG61G-2/1/5c65be2099fc0aafe90b601e476e6014
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 25 (2008)
Issue (Month): 3 (May)
Pages: 485-498

as in new window
Handle: RePEc:eee:ecmode:v:25:y:2008:i:3:p:485-498

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  2. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  3. André Decoster & Erwin Ooghe, 2002. "Weighting with individuals, equivalent individuals, or not weighting at all. Does it matter empirically?," Public Economics Working Paper Series ces0215, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  4. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-90, July.
  5. Lewbel, Arthur, 1989. "Exact Aggregation and a Representative Consumer," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 621-33, August.
  6. John Creedy & Catherine Sleeman, 2005. "Adult Equivalence Scales, Inequality and Poverty," Department of Economics - Working Papers Series 938, The University of Melbourne.
  7. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476.
  8. Dave Turner & Claude Giorno & Alain de Serres & Ann Vourc'h & Pete Richardson, 1998. "The Macroeconomic Implications of Ageing in a Global Context," OECD Economics Department Working Papers 193, OECD Publishing.
  9. David M. Cutler & Lawrence F. Katz, 1992. "Rising Inequality? Changes in the Distribution of Income and Consumption in the 1980s," NBER Working Papers 3964, National Bureau of Economic Research, Inc.
  10. Shorrocks, Anthony, 2004. "Inequality and Welfare Evaluation of Heterogeneous Income Distributions," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  11. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  12. Ebert, Udo, 1997. "Social Welfare When Needs Differ: An Axiomatic Approach," Economica, London School of Economics and Political Science, vol. 64(254), pages 233-44, May.
  13. Werner R�ger & Jan in 't Veld, 2002. "Some selected simulation experiments with the European Commission's QUEST model," European Economy - Economic Papers 178, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  14. Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, vol. 104(425), pages 891-900, July.
  15. Anthony Shorrocks, 2004. "Inequality and welfare evaluation of heterogeneous income distributions," Journal of Economic Inequality, Springer, vol. 2(3), pages 193-218, July.
  16. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  17. John Creedy, 2006. "Evaluating Policy: Welfare Weights And Value Judgements," Department of Economics - Working Papers Series 971, The University of Melbourne.
  18. Productivity Commission, 2005. "Economic Implications of an Ageing Australia," Labor and Demography 0506001, EconWPA.
  19. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  20. Glewwe, Paul, 1991. "Household equivalence scales and the measurement of inequality : Transfers from the poor to the rich could decrease inequality," Journal of Public Economics, Elsevier, vol. 44(2), pages 211-216, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. John Creedy & Ross Guest, 2008. "Sustainable Preferences and Damage Abatement:Value Judgments and Implications for Consumption Streams," Department of Economics - Working Papers Series 1026, The University of Melbourne.
  2. Melnikov, N.B. & O'Neill, B.C. & Dalton, M.G., 2012. "Accounting for household heterogeneity in general equilibrium economic growth models," Energy Economics, Elsevier, vol. 34(5), pages 1475-1483.
  3. Creedy, John & Guest, Ross, 2008. "Changes in the taxation of private pensions: Macroeconomic and welfare effects," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 693-712.
  4. Lees, Kirdan, 2013. "Golden years? The impacts of New Zealand’s ageing on wages, interest rates, wealth and macroeconomy," NZIER Working Paper 2013/1, New Zealand Institute of Economic Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:25:y:2008:i:3:p:485-498. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.