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Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis

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  • Isaac Ehrlich
  • Yong Yin

Abstract

To what extent can life protection account for observed diversities in age-specific life expectancies across individuals and over time? We provide answers via calibrated simulations of a life-cycle model where life’s end is stochastic, and age-specific mortality hazards are endogenous outcomes of life protection, set jointly with life insurance and annuities. Our model links mortality hazards and values of life saving (VLS) as “dual variables”, and offers new insights about the measurement of VLS. Life protection is estimated to account for non-trivial portions of observed levels and inequalities in life expectancies and empirical estimates of VLS by age and education, and over time. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Isaac Ehrlich & Yong Yin, 2005. "Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis," Journal of Risk and Uncertainty, Springer, vol. 31(2), pages 129-162, September.
  • Handle: RePEc:kap:jrisku:v:31:y:2005:i:2:p:129-162
    DOI: 10.1007/s11166-005-3552-9
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    More about this item

    Keywords

    endogenous mortality; uncertainty; human capital; stochastic optimization; calibrated simulations; self-protection; annuities; life insurance; longevity;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • I1 - Health, Education, and Welfare - - Health

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