Uncertain Longevity and Investment in Education
AbstractIt has been argued that increased life expectancy raises the rate of return on education, causing a rise in the investment in education followed by an increase in lifetime labor supply. Empirical evidence of these relations is rather weak. Building on a lifecycle model with uncertain longevity, this paper shows that increased life expectancy does not suffice to warrant the above hypotheses. We provide assumptions about the change in survival probabilities, specifically about the age dependence of hazard rates, which determine individuals' behavioral response w.r.t. education, work and age of retirement. Comparison is made between the case when individuals have access to a competitive annuity market and the case of no insurance.
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Bibliographic InfoPaper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp520.
Date of creation: Sep 2009
Date of revision:
Other versions of this item:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-09-11 (Economics of Ageing)
- NEP-ALL-2009-09-11 (All new papers)
- NEP-EDU-2009-09-11 (Education)
- NEP-HRM-2009-09-11 (Human Capital & Human Resource Management)
- NEP-LAB-2009-09-11 (Labour Economics)
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