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Choosing Longevity with Overlapping Generations

Weichun Chen, Merwan Engineer () and Ian King ()

No 1002, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: We extend Diamond’s (1965) OLG model to allow agents to choose whether to participate in the second period of life. The valuation of early exit (x) is a key parameter. We characterize competitive equilibria, efficient allocations, and predictions for income and life expectancy over time. We find that, with logarithmic utility, for any value of x, there is a range of initial values of the capital stock for which some agents would prefer to exit in equilibrium. The shape of the transition function and the number of steady state equilibria depend crucially on the value of capital’s share of income.

Keywords: ndogenous longevity; overlapping generations; growth (search for similar items in EconPapers)
JEL-codes: D91 O1 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2007
New Economics Papers: this item is included in nep-dge, nep-hea and nep-upt
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