Choosing Longevity with Overlapping Generations
AbstractWe extend Diamond’s (1965) OLG model to allow agents to choose whether to participate in the second period of life. The valuation of early exit (x) is a key parameter. We characterize competitive equilibria, efficient allocations, and predictions for income and life expectancy over time. We find that, with logarithmic utility, for any value of x, there is a range of initial values of the capital stock for which some agents would prefer to exit in equilibrium. The shape of the transition function and the number of steady state equilibria depend crucially on the value of capital’s share of income.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1002.
Length: 47 pages
Date of creation: 2007
Date of revision:
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More information through EDIRC
ndogenous longevity; overlapping generations; growth;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-24 (All new papers)
- NEP-DGE-2007-09-24 (Dynamic General Equilibrium)
- NEP-HEA-2007-09-24 (Health Economics)
- NEP-UPT-2007-09-24 (Utility Models & Prospect Theory)
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