Optimal Aging and Death
AbstractThis study introduces physiological aging into a simple model of optimal in- tertemporal consumption. In this endeavor we draw on the natural science literature on aging. According to the purposed theory, the speed of the aging process and the time of death are endogenously determined by optimal health investments. At the same time, physiological aspects of the aging process influence optimal savings and health investment. We calibrate the model for the average US male in 2000 and proceed to show that the calibrated model accounts well for the cross-country link between labor productivity and life expectancy in the same year (\the Preston curve"); cross-country income di erences can explain di erences in life expectancy at age 20 of up to a decade. Moreover, techno- logical change in health care of about 1.1% per year can account for the observed shift in the Preston curve between 1980 and 2000.K
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Bibliographic InfoPaper provided by Program on the Global Demography of Aging in its series PGDA Working Papers with number 5810.
Date of creation: Jul 2010
Date of revision:
Aging; Longevity; Health Investments; Savings; Preston Curve;
This paper has been announced in the following NEP Reports:
- NEP-AGE-2010-12-18 (Economics of Ageing)
- NEP-ALL-2010-12-18 (All new papers)
- NEP-DGE-2010-12-18 (Dynamic General Equilibrium)
- NEP-EVO-2010-12-18 (Evolutionary Economics)
- NEP-HEA-2010-12-18 (Health Economics)
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