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Choosing Longevity with Overlapping Generations

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Author Info

  • Weichun Chen
  • Merwan Engineer
  • Ian King

Abstract

We 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 Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1002.

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Length: 47 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mlb:wpaper:1002

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Related research

Keywords: ndogenous longevity; overlapping generations; growth;

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References

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  1. 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.
  2. K Blackburn & H Issa, 2002. "Endogenous Life Expectancy in a Simple Model of Growth," The School of Economics Discussion Paper Series 0217, Economics, The University of Manchester.
  3. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  4. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-82, August.
  5. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2005. "The Quantity and Quality of Life and the Evolution of World Inequality," American Economic Review, American Economic Association, vol. 95(1), pages 277-291, March.
  6. Angus Deaton, 2001. "Health, Inequality, and Economic Development," NBER Working Papers 8318, National Bureau of Economic Research, Inc.
  7. K Blackburn & H Issa, 2002. "Endogenous Life Expectancy in a Simple Model of Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 13, Economics, The Univeristy of Manchester.
  8. repec:rus:hseeco:71105 is not listed on IDEAS
  9. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  10. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers 12378, Iowa State University, Department of Economics.
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Cited by:
  1. Driouchi, Ahmed & Boboc, Cristina & Zouag, Nada, 2009. "Interdependencies of Health, Education and Poverty: The Case of South Mediterranean Economies/Interdependencias de salud, educación y pobreza: el caso de las Economías Sur-Mediterráneas," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 27, pages 523-544, Agosto.

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