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Probabilistic Aging

  • Dominik Grafenhofer
  • Christian Jaag
  • Christian Keuschnigg
  • Mirela Keuschnigg

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 close approximation of demographic structure and life-cycle differences in earnings, wealth and consumption. Existing classes of overlapping generations models follow as special cases.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1680.

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Date of creation: 2006
Date of revision:
Handle: RePEc:ces:ceswps:_1680
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