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How Powerful is Demography? The Serendipity Theorem Revisited

  • David De La Croix

    ()

    (CORE - Department of Economics - UCL - Université Catholique de Louvain)

  • Pierre Pestieau

    (CREPP - Center of Research in Public Economics and Population Economics - Université de Liège, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CEPR - Center for Economic Policy Research - CEPR, PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))

  • Grégory Ponthière

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))

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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Date of creation: Dec 2009
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Handle: RePEc:hal:pseose:halshs-00575095
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  1. Michel, Philippe & Pestieau, P, 1993. "Population Growth and Optimality: When Does Serendipity Hold?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 6(4), pages 353-62, November.
  2. David De la Croix & Omar Licandro, 2009. "The Child is Father of the Man: Implications for the Demographic Transition," Working Papers 376, Barcelona Graduate School of Economics.
  3. Jeffrey R. Brown, 2007. "Rational and Behavioral Perspectives on the Role of Annuities in Retirement Planning," NBER Working Papers 13537, National Bureau of Economic Research, Inc.
  4. David de la Croix & Omar Licandro, 2008. "The Child is Father of the Man: by Implications for the Demographic Transition," Working Papers 2008-04, FEDEA.
  5. Klaus Jaeger & Wolfgang Kuhle, 2009. "The optimum growth rate for population reconsidered," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(1), pages 23-41, January.
  6. de la Croix, David & Mahieu, Géraldine & Rillaers, Alexandra, 2000. "How should retirement policy adjust to the baby bust ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Deardorff, Alan V, 1976. "The Optimum Growth Rate for Population: Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 510-15, June.
  8. JOUVET, Pierre-André & PESTIEAU, Pierre & PONTHIERE, Gregory, 2007. "Longevity and environmental quality in an OLG model," CORE Discussion Papers 2007069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. David De La Croix & Grégory Ponthière, 2008. "On the Golden Rule of capital accumulation under endogenous longevity," PSE Working Papers halshs-00586242, HAL.
  10. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June.
  11. Gemma Abio Roig, 2003. "Interiority of the Optimal Population Growth Rate with Endogenous Fertility," Working Papers in Economics 96, Universitat de Barcelona. Espai de Recerca en Economia.
  12. 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.
  13. Shankha Chakraborty, 2002. "Endogenous Lifetime and Economic Growth," University of Oregon Economics Department Working Papers 2002-03, University of Oregon Economics Department, revised 26 Jan 2002.
  14. Matthias Doepke, 2001. "Accounting for Fertility Decline During the Transition to Growth," UCLA Economics Working Papers 804, UCLA Department of Economics.
  15. G. ABIO & Géraldine MAHIEU & C. Patxot, 2002. "On the Optimality of PAYG Pension Systems in an Endogenous Fertility Setting," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  16. Gregory Ponthiere, 2009. "Rectangularization And The Rise In Limit-Longevity In A Simple Overlapping Generations Model," Manchester School, University of Manchester, vol. 77(1), pages 17-46, 01.
  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. Galor, Oded & Moav, Omer, 2005. "Natural Selection and the Evolution of Life Expectancy," CEPR Discussion Papers 5373, C.E.P.R. Discussion Papers.
  19. repec:ebl:ecbull:v:10:y:2003:i:4:p:1-7 is not listed on IDEAS
  20. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-83, June.
  21. Blackorby,Charles & Bossert,Walter & Donaldson,David J., 2005. "Population Issues in Social Choice Theory, Welfare Economics, and Ethics," Cambridge Books, Cambridge University Press, number 9780521532587, Junio.
  22. DE LA CROIX, David & MAHIEU, Géraldine & RILLAERS, Alexandra, . "How should the allocation of resources adjust to the baby bust?," CORE Discussion Papers RP 1741, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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