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How Powerful is Demography? The Serendipity Theorem Revisited

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Author Info

  • David de la CROIX

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques etSsociales (IRES) and Center for Operations Research and Econometrics (CORE))

  • Pierre PESTIEAU

    (University of Liege, CORE, Paris School of Economics and CEPR)

  • Gregory PONTHIERE

    (Paris School of Economics and Ecole Normale Superieure, Paris)

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, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2009040.

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Length: 20
Date of creation: 11 Dec 2009
Date of revision:
Handle: RePEc:ctl:louvir:2009040

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

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References

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  1. 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.
  2. 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).
  3. DE LA CROIX, David & LICANDRO, Omar, 2007. "‘The child is father of the man’: implications for the demographic transition," CORE Discussion Papers 2007072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Klaus Jaeger & Wolfgang Kuhle, 2009. "The optimum growth rate for population reconsidered," Journal of Population Economics, Springer, vol. 22(1), pages 23-41, January.
  5. repec:ebl:ecbull:v:10:y:2003:i:4:p:1-7 is not listed on IDEAS
  6. 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.
  7. Galor, Oded & Moav, Omer, 2005. "Natural Selection and the Evolution of Life Expectancy," CEPR Discussion Papers 5373, C.E.P.R. Discussion Papers.
  8. DE LA CROIX, David & MAHIEU, Géraldine & RILLAERS, Alexandra, . "How should the allocation of resources adjust to the baby bust?," CORE Discussion Papers RP -1741, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  10. 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.
  11. Gemma Abio, 2003. "Interiority of the optimal population growth rate with endogenous fertility," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-7.
  12. Michel, Philippe & Pestieau, P, 1993. "Population Growth and Optimality: When Does Serendipity Hold?," Journal of Population Economics, Springer, vol. 6(4), pages 353-62, November.
  13. de la Croix, David & Mahieu, Géraldine & Rillaers, Alexandra, 2000. "How should retirement policy adjust to the baby bust ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  14. Matthias Doepke, 2001. "Accounting for Fertility Decline During the Transition to Growth," UCLA Economics Working Papers 804, UCLA Department of Economics.
  15. 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.
  16. 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.
  17. repec:pse:psecon:2008-48 is not listed on IDEAS
  18. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428, November.
  19. 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.
  20. 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.
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Citations

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Cited by:
  1. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," Working Papers halshs-00676492, HAL.
  2. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," PSE Working Papers halshs-00676492, 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. Fanti, Luciano & Gori, Luca, 2010. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," MPRA Paper 26146, University Library of Munich, Germany.
  5. 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.
  6. Grégory Ponthière, 2012. "Fair Accumulation under Risky Lifetime," PSE Working Papers halshs-00746913, HAL.
  7. Grégory Ponthière, 2012. "Fair Accumulation under Risky Lifetime," Working Papers halshs-00746913, HAL.
  8. Pierre Pestieau & Grégory Ponthière, 2011. "Optimal Fertility along the Lifecycle," Working Papers hal-00612609, HAL.

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