Optimal Aging with Uncertain Death
This note extends the theory of optimal aging and death (Dalgaard and Strulik, 2010) towards uncertain death. Specifically, it is assumed that at any age the probability to survive depends on the number of health deficits accumulated. It is shown that the results in Dalgaard and Strulik (2011) on the foundation of the Preston curve (the association between income and life-expectancy across countries) are robust against this extension. While results virtually coincide at high income levels, the stochastic version predicts somewhat more curvature of the Preston curve at low income levels. Taking uncertain death and a precautionary motive for health investment into account thus further improves a bit the anyway good fit of the Preston curve.
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- Heijdra, Ben J. & Romp, Ward E., 2005.
"A Life-Cycle Overlapping-Generations Model of the Small Open Economy,"
05C04, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Ben J. Heijdra & Ward E. Romp, 2008. "A life-cycle overlapping-generations model of the small open economy," Oxford Economic Papers, Oxford University Press, vol. 60(1), pages 88-121, January.
- Holger Strulik & Sebastian Vollmer, 2013.
"Long-run trends of human aging and longevity,"
Journal of Population Economics,
Springer, vol. 26(4), pages 1303-1323, October.
- Eytan Sheshinski, 2007. "The Economic Theory of Annuities," Economics Books, Princeton University Press, edition 1, volume 1, number 8536.
- Carl-Johan Dalgaard & Holger Strulik, 2010. "Optimal Aging and Death," PGDA Working Papers 5810, Program on the Global Demography of Aging.
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