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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 accurate approximation of demographic change and of 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 Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2005 with number 2005-08.

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Length: 50 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:usg:dp2005:2005-08
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