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Over-aging: Are present human populations too old?

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  • Stelter, Robert

Abstract

This paper investigates the problem of an \optimum population" concerning age structures in a 3-period OLG-model with endogenous fertility and longevity. The first-best solution for a number-dampened total social welfare function, including Millian and Benthamite utilitarianism as two extreme cases, identifies the optimal age structure, generally failed in the laissez-faire economy. Individuals over-invest in health expenditures and choose a non-optimal number of offspring. A calibration exercise for 80 countries emphasizes that mean ages in the optimal solution with the highest feasible individual utility exceed the observed in all countries, especially due to a very low first-best number of children. Introducing a preference for the population stock in the social welfare function increases fertility, but reduces individual utility, in the first-best solution. Optimal mean age shrinks and an over-aging of the laissez-faire economy becomes more likely. To decentralize first-best solutions health expenditures are taxed, whereas children are either taxed or subsided.

Suggested Citation

  • Stelter, Robert, 2014. "Over-aging: Are present human populations too old?," Thuenen-Series of Applied Economic Theory 137, University of Rostock, Institute of Economics.
  • Handle: RePEc:zbw:roswps:137
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    More about this item

    Keywords

    endogenous fertility; adult mortality; optimal age structure; over-aging; optimal taxation;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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