The Cost of Cyclical Mortality
Sustained growth in both incomes and life spans are the hallmarks of modern development. Fluctuations around trend in the former, or business cycles, have been a traditional focus in macroeconomics, while similar cyclical patterns in mortality are also interesting and are now increasingly studied. In this paper, I assess the welfare implications of cyclical fluctuations in mortality using a new utility-theoretic model of preferences over uncertain length of life. Echoing the classic result of Lucas (1987) regarding business cycles, my findings suggest that short-term fluctuations in mortality are not very costly. While consumption fluctuations are relatively large, cyclical fluctuations in mortality are tiny compared to the much larger static uncertainty in length of life that derives from naturally rising mortality rates through age. Secular improvements in life expectancy and gains against static health inequalities appear to be much more important than cyclical mortality.
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Volume (Year): 9 (2009)
Issue (Month): 1 (March)
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