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Probabilistic Aging

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  • Dominik Grafenhofer
  • Christian Jaag

    ()

  • Christian Keuschnigg

    ()

  • Mirela Keuschnigg

Abstract

The paper develops an overlapping generations model with probabilistic aging of households. We define age as a set of personal attributes such as earnings potential, health and tastes that are characteristic of a person's position in the life-cycle. In assuming a limited number of different states of age, we separate the concepts of age and time since birth. Agents may retain their age characteristics for several periods before they move with a given probability to another state of age. Different generations that share the same age characteristics are aggregated analytically to a low number of age groups. The probabilistic aging model thus allows for a very parsimonious yet rather accurate approximation of demographic change and of life-cycle differences in earnings, wealth and consumption. Existing classes of overlapping generations models follow as special cases.

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Bibliographic Info

Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2005 with number 2005-08.

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Length: 50 pages
Date of creation: Mar 2005
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Handle: RePEc:usg:dp2005:2005-08

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Citations

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Cited by:
  1. Christian Jaag & Christian Keuschnigg & Mirela Keuschnigg, 2007. "Pension Reform, Retirement and Life-Cycle Unemployment," CESifo Working Paper Series 2163, CESifo Group Munich.
  2. Christian Jaag, 2005. "The Role of Endogenous Skill Choice in an Aging Economy," Public Economics 0505005, EconWPA.
  3. David Weil & Heinrich Hock, 2006. "The Dynamics of the Age Structure, Dependency, and Consumption," Working Papers 2006-08, Brown University, Department of Economics.
  4. Dominik Grafenhofer & Christian Jaag & Christian Keuschnigg & Mirela Keuschnigg, 2007. "Economic ageing and demographic change," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 5(1), pages 133-165.

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