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How Powerful is Demography? The Serendipity Theorem Revisited

  • David de la CROIX

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques etSsociales (IRES) and Center for Operations Research and Econometrics (CORE))

  • Pierre PESTIEAU

    (University of Liege, CORE, Paris School of Economics and CEPR)

  • Gregory PONTHIERE

    (Paris School of Economics and Ecole Normale Superieure, Paris)

Introduced by Samuelson (1975), the Serendipity Theorem states that the competitive economy will converge towards the optimum steady-state provided the optimum population growth rate is imposed. This paper aims at exploring whether the Serendipity Theorem still holds in an economy with risky lifetime. We show that, under general conditions, including a perfect annuity market with actuarially fair return, imposing the optimum fertility rate and the optimum survival rate leads the competitive economy to the optimum steady-state. That Extended Serendipity Theorem is also shown to hold in economies where old adults work some fraction of the old-age, whatever the retirement age is fixed or chosen by the agents.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2009040.

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Date of creation: 11 Dec 2009
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Handle: RePEc:ctl:louvir:2009040
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  2. JOUVET, Pierre-André & PESTIEAU, Pierre & PONTHIERE, Grégory, . "Longevity and environmental quality in an OLG model," CORE Discussion Papers RP 2377, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  17. 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.
  18. Samuelson, Paul A, 1975. "The Optimum Growth Rate for Population," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 531-38, October.
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