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Life expectancy, labor supply, and long-run growth: Reconciling theory and evidence

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  • Strulik, Holger
  • Werner, Katharina

Abstract

We set up a simple overlapping generation model that allows us to distinguish between life expectancy and active life expectancy. We show that individuals optimally adjust to a longer active life by educating more and, if the labor supply elasticity is high enough, by supplying less labor. When calibrated to US data the model explains the historical evolution of increasing education and declining labor supply (of cohorts born 1850-1950) as an optimal response to increasing active life expectancy. We integrate the theory into a unified growth model and reestablish increasing life expectancy as an engine of long-run economic development.

Suggested Citation

  • Strulik, Holger & Werner, Katharina, 2012. "Life expectancy, labor supply, and long-run growth: Reconciling theory and evidence," Center for European, Governance and Economic Development Research Discussion Papers 141, University of Goettingen, Department of Economics.
  • Handle: RePEc:zbw:cegedp:141
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    Cited by:

    1. Ken-ichi Hashimoto & Ken Tabata, 2016. "Demographic change, human capital accumulation and R&D-based growth," Canadian Journal of Economics, Canadian Economics Association, vol. 49(2), pages 707-737, May.
    2. Sau-Him Lau, 2013. "Does longevity improvement always raise the length of schooling through the longer-horizon mechanism?," 2013 Meeting Papers 292, Society for Economic Dynamics.
    3. Matteo Cervellati & Uwe Sunde, 2013. "Life Expectancy, Schooling, and Lifetime Labor Supply: Theory and Evidence Revisited," Econometrica, Econometric Society, vol. 81(5), pages 2055-2086, September.
    4. Sánchez-Romero, Miguel & d׳Albis, Hippolyte & Prskawetz, Alexia, 2016. "Education, lifetime labor supply, and longevity improvements," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 118-141.
    5. Carl-Johan Dalgaard & Holger Strulik, 2017. "The Genesis of the Golden Age: Accounting for the Rise in Health and Leisure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 132-151, March.
    6. Thomas Baudin & Robert Stelter, 2016. "Rural exodus and fertility at the time of industrialization," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2016020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    7. Nina Boberg-Fazlic, 2012. "Longevity and Schooling: The Case of Retirement," Discussion Papers 12-15, University of Copenhagen. Department of Economics.

    More about this item

    Keywords

    longevity; active life expectancy; education; hours worked; economic growth.;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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