Abstract:

Two salient features of modern economic growth are the rise in aggregate savings rates and the steady increase in life expectancy. This paper links these processes, showing that under certain conditions economic theory supports the hypothesis that increased longevity leads to higher aggregate savings in steady state. The analysis is based on a lifecycle model with uncertain longevity in which individuals choose an optimum consumption path and a retirement age. Conditions on the age-speci…c pattern of improvements in survival probabilities are shown to ensure that individual savings rise with longevity and that aggregation preserves this result. Population theory (Coale (1972)) [...]

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