How life expectancy affects welfare in a Diamond-type overlapping generations model

2020 ◽  
Vol 555 ◽  
pp. 124616
Author(s):  
Xiaodong Cui ◽  
Ching-Ter Chang
Keyword(s):  
Life Expectancy ◽  
Overlapping Generations ◽  
Overlapping Generations Model ◽  
Diamond Type

scholarly journals ADULT LONGEVITY AND GROWTH TAKEOFF

2014 ◽  
Vol 20 (1) ◽  
pp. 165-188 ◽  
Author(s):  
Daishin Yasui
Keyword(s):  
Life Cycle ◽  
Life Expectancy ◽  
Early Retirement ◽  
Overlapping Generations ◽  
Working Life ◽  
Adult Longevity ◽  
Overlapping Generations Model ◽  
Fertility Decisions ◽  
Retirement Decisions ◽  
Positive Effect

This paper develops an overlapping-generations model in which agents make educational and fertility decisions under life-cycle considerations and retirement from work is distinguished from death. Gains in adult longevity induce agents to decrease fertility, invest in education, and achieve higher income in order to save more for retirement. Even if working life is shortened by early retirement, this mechanism works as long as adult longevity increases sufficiently. Our model can explain the positive effect of life expectancy on education without contradicting the fact that working life length has not substantially increased, because of retirement. We also provide new insights into the interaction between fertility and retirement decisions.

MORTALITY DECLINE, RETIREMENT AGE, AND AGGREGATE SAVINGS

2014 ◽  
Vol 20 (3) ◽  
pp. 715-736 ◽  
Author(s):  
Yanyou Chen ◽  
Sau-Him Paul Lau
Keyword(s):  
Life Expectancy ◽  
Overlapping Generations ◽  
Survival Function ◽  
Mortality Decline ◽  
Retirement Age ◽  
Overlapping Generations Model ◽  
Future Behavior ◽  
Life Expectancy Increase ◽  
One Year ◽  
Endogenous Retirement

We use an overlapping-generations model with endogenous retirement and saving to study the trade-off between saving and retirement age in response to mortality decline. When life expectancy increases by one year, people delay retirement by about four months. With this magnitude of delay in retirement age, the percentage of lifetime spent in working decreases, and people have to save more for postretirement years. Neither the pure form of sole adjustment through savings nor the proportionality hypothesis is consistent with our results, but the proportionality hypothesis is a better rule of thumb in predicting future behavior. Our choice of the modified Boucekkine et al. (2002) survival function gives a convenient one-to-one correspondence between life expectancy increase and a change in the survival parameter.

EXISTENCE AND UNIQUENESS OF STEADY-STATE EQUILIBRIUM IN A GENERALIZED OVERLAPPING GENERATIONS MODEL

2011 ◽  
Vol 16 (S3) ◽  
pp. 299-311 ◽  
Author(s):  
Jinlu Li ◽  
Shuanglin Lin
Keyword(s):  
Steady State ◽  
Existence And Uniqueness ◽  
Overlapping Generations ◽  
Optimization Problem ◽  
Utility Functions ◽  
Overlapping Generations Model ◽  
State Equilibrium ◽  
Derivatives Of ◽  
Uniqueness Of Equilibrium ◽  
Diamond Type

Galor and Ryder [Journal of Economic Theory 49 (1989), 360–375] establish conditions for the existence of equilibrium in a Diamond-type overlapping-generations (OLG) model. Although theoretically appealing, these conditions are implicit and not convenient to apply. This paper provides explicit and easily applied conditions for the existence and uniqueness of steady-state equilibrium, with which one only needs to check the first derivatives of the production and utility functions and their interactions, with no need to solve the optimization problem. Our theorems on the existence and uniqueness of steady-state equilibrium can be applied to a larger class of OLG models that do not require second-order differentiability of the production and utility functions. We present examples to show how to check the existence and uniqueness of equilibrium.

scholarly journals INCOME INEQUALITY, MOBILITY, AND THE WELFARE STATE: A POLITICAL ECONOMY MODEL

2012 ◽  
Vol 17 (6) ◽  
pp. 1198-1226 ◽  
Author(s):  
Luca Bossi ◽  
Gulcin Gumus
Keyword(s):  
Income Inequality ◽  
Welfare State ◽  
Social Insurance ◽  
Overlapping Generations ◽  
Tax Rates ◽  
Overlapping Generations Model ◽  
Public Programs ◽  
Transfer Payments ◽  
Set Up ◽  
The Welfare State

In this paper, we set up a three-period stochastic overlapping-generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.

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