Life, Death, and the Economy: Mortality Change in Overlapping-Generations Model

34 Pages Posted: 14 Feb 2008

See all articles by Qi Li

Qi Li

Texas A&M University - Department of Economics

Shripad Tuljapurkar

Stanford University

Date Written: January 1, 2004

Abstract

Demographers have shown that there are regularities in mortality change overtime, and have used these to forecast changes due to population aging. Such models leave out potential economic feedbacks that should be captured by dynamic models such as the general-equilibrium, overlapping-generations model first studied by Yaari and Blanchard. Previous analytical and simple numerical work by economists has focused on comparative statics and used simplistic representations of mortality, such as the assumption of a constant age-independent death rate, or some parametric approximation to a survival curve. We show that it is straight forward to analyze equilibria in such models if we work with the probability distribution of the age at death. US and other data show that this distribution can be plausibly described by a normal distribution {for this case we obtain analytical results. For the general case we have numerical results. We show that a proper accounting for the uncertainty of when one dies has significant qualitative and quantitative effects on the equilibria of such economic models. There are, in turn, significant lessons to be drawn for models of future fiscal policy.

Suggested Citation

Li, Qi and Tuljapurkar, Shripad, Life, Death, and the Economy: Mortality Change in Overlapping-Generations Model (January 1, 2004). Michigan Retirement Research Center Research Paper No. WP 2004-072, Available at SSRN: https://ssrn.com/abstract=1092530 or http://dx.doi.org/10.2139/ssrn.1092530

Qi Li

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States
979-845-7349 (Phone)

Shripad Tuljapurkar (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

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