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How powerful is demography ? The Serendipity Theorem revisited

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  • DE LA CROIX, David

    ()
    (Université catholique de Louvain, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium)

  • PESTIEAU, Pierre

    ()
    (Université catholique de Louvain, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium)

  • PONTHIERE, Gregory

    ()
    (Paris School of Economics and Ecole Normale Supérieure, Paris, France)

Abstract

Introduced by Samuelson (1975), the Serendipity Theorem states that the competitive economy will converge towards the optimum steady-state provided the optimum population growth 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

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2009076.

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Date of creation: 01 Dec 2009
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Handle: RePEc:cor:louvco:2009076

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Keywords: Serendipity Theorem; fertility; mortality; overlapping generations; retirement;

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References

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  1. MICHEL, Philippe & PESTIEAU, Pierre, . "Population growth and optimality. When does serendipity hold?," CORE Discussion Papers RP -1072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Deardorff, Alan V, 1976. "The Optimum Growth Rate for Population: Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 510-15, June.
  3. Alexandra Rillaers & David de la Croix & Geraldine Mahieu, 2003. "How Should The Allocation Of Resources Adjust To The Baby Bust?," Working Papers. Serie AD 2003-27, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  4. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428.
  5. JOUVET, Pierre-André & PESTIEAU, Pierre & PONTHIERE, Grégory, . "Longevity and environmental quality in an OLG model," CORE Discussion Papers RP -2377, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. 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.
  7. Shankha Chakraborty, 2002. "Endogenous Lifetime and Economic Growth," University of Oregon Economics Department Working Papers 2002-03, University of Oregon Economics Department, revised 26 Jan 2002.
  8. Jeffrey R. Brown, 2007. "Rational and Behavioral Perspectives on the Role of Annuities in Retirement Planning," NBER Working Papers 13537, National Bureau of Economic Research, Inc.
  9. Samuelson, Paul A, 1975. "The Optimum Growth Rate for Population," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 531-38, October.
  10. Galor, Oded & Moav, Omer, 2005. "Natural Selection and the Evolution of Life Expectancy," CEPR Discussion Papers 5373, C.E.P.R. Discussion Papers.
  11. David de la Croix & Omar Licandro, 2009. "“The Child is Father of the Man:” Implications for the Demographic Transition," Working Papers 376, Barcelona Graduate School of Economics.
  12. Klaus Jaeger & Wolfgang Kuhle, 2009. "The optimum growth rate for population reconsidered," Journal of Population Economics, Springer, vol. 22(1), pages 23-41, January.
  13. Gregory Ponthiere, 2009. "Rectangularization And The Rise In Limit-Longevity In A Simple Overlapping Generations Model," Manchester School, University of Manchester, vol. 77(1), pages 17-46, 01.
  14. Blackburn, Keith & Cipriani, Giam Pietro, 2002. "A model of longevity, fertility and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 187-204, February.
  15. Gemma Abio, 2003. "Interiority of the optimal population growth rate with endogenous fertility," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-7.
  16. Matthias Doepke, 2004. "Accounting for Fertility Decline During the Transition to Growth," Journal of Economic Growth, Springer, vol. 9(3), pages 347-383, 09.
  17. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June.
  18. repec:ebl:ecbull:v:10:y:2003:i:4:p:1-7 is not listed on IDEAS
  19. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-83, June.
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Citations

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Cited by:
  1. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," PSE Working Papers halshs-00676492, HAL.
  2. Grégory Ponthière, 2012. "Fair Accumulation under Risky Lifetime," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00746913, HAL.
  3. PESTIEAU, Pierre & PONTHIERE, Grégory, 2011. "Optimal fertility along the lifecycle," CORE Discussion Papers 2011033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Luciano Fanti & Luca Gori, 2014. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," Journal of Population Economics, Springer, vol. 27(2), pages 529-564, April.
  5. Thomas Renstrom & Luca Spataro, 2014. "Population growth and human capital: a welfarist approach," Public Finance Research Papers 3, Istituto di Economia e Finanza, DIGEF, Sapienza University of Rome.
  6. 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, Society for Computational Economics, vol. 40(4), pages 333-353, December.
  7. repec:hal:wpaper:halshs-00676492 is not listed on IDEAS
  8. repec:hal:wpaper:hal-00612609 is not listed on IDEAS
  9. repec:hal:wpaper:halshs-00746913 is not listed on IDEAS
  10. repec:hal:psewpa:halshs-00746913 is not listed on IDEAS

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