Life cycles with Endogenous Time Allocation and Age-Dependent Mortality

Manuel Guerra, Joao Pereira () and Miguel Aubyn ()

No 2018/56, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: The negative effect of population aging on the economy can be mitigated by a behavioral effect of people as a reaction to a higher life expectancy. We analyze the optimal life-cycle of individuals that allocate time at the intensive margin between leisure, human capital accumulation, and labor supply while facing an age-dependent mortality. This allows to enhance effects of changes in life expectancy on labor supply and human capital accumulation and to uncover trade-offs between time allocations at different stages of the life-cycle. Our life-cycles are characterized by on the job training throughout all the working life with a possibility of a temporary exit from the labor market. We simulate the model numerically and nd that with a higher life expectancy, labor supply increases at the intensive margin and the individual invests more in human capital. We also nd a willingness to increase labor supply at the extensive margin.

Keywords: Life-Cycle; Age-Dependent Mortality; Aging; Time Allocation (search for similar items in EconPapers)
JEL-codes: D15 H55 J22 J24 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-age, nep-cmp, nep-dem, nep-dge, nep-hea and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp0562018

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