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Risk aversion and longevity in an overlapping generations model

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  • Futagami, Koichi
  • Sunaga, Miho

Abstract

We analyze how increasing longevity affects economic development based on differences in the risk attitudes of young and old individuals. We construct an overlapping generations model given an economy grows with the help of the capital and intermediate goods produced by individual activities. The outcomes of these activities are stochastically determined. We analytically and numerically show that increasing longevity hinders capital accumulation in the economy when old individuals are more risk-averse than young individuals. Thus, if old individuals are less willing to take risks in the economy, population aging will consequently slow economic growth.

Suggested Citation

  • Futagami, Koichi & Sunaga, Miho, 2022. "Risk aversion and longevity in an overlapping generations model," Journal of Macroeconomics, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:jmacro:v:72:y:2022:i:c:s0164070422000179
    DOI: 10.1016/j.jmacro.2022.103415
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    References listed on IDEAS

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    More about this item

    Keywords

    Risk aversion; Longevity; Overlapping generations model; Population aging;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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