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Optimal Aging and Death: Understanding the Preston Curve

Author

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  • Carl-Johan Dalgaard

    (Department of Economics, University of Copenhagen)

  • Holger Strulik

    (University of Hannover)

Abstract

The present study examines whether the Preston curve reflects a causal impact of income on longevity or, for example, factors correlated with both income and life expectancy. In order to understand the Preston curve better, we develop a model of optimal intertemporal consumption in which the representative consumer is subject to physiological aging. In modeling aging we draw on recent research in the fields of biology and medicine. The speed of the aging process, and thus the time of death, are endogenously determined by optimal health investments. We calibrate the model to US data and proceed to show that the model accounts for nearly 80% of the cross-country differences in life expectancy that the Preston curve captures.

Suggested Citation

  • Carl-Johan Dalgaard & Holger Strulik, 2010. "Optimal Aging and Death: Understanding the Preston Curve," Discussion Papers 11-09, University of Copenhagen. Department of Economics, revised Mar 2011.
  • Handle: RePEc:kud:kuiedp:1109
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    References listed on IDEAS

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    1. David E. Bloom & David Canning & Jaypee Sevilla, 2001. "Economic Growth and the Demographic Transition," NBER Working Papers 8685, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    aging; longevity; health investments; savings; Preston curve;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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