Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 51: On the Value of Changes in Life Expectancy

Per-Olov Johansson ()
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Per-Olov Johansson: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden

Abstract: In this note the value of parametric changes in hazard rates is analyzed. Two different kinds of changes, sudden or 'blip' changes and persistent changes, respectively, are considered within a model in which both the marginal rate of time preference and the survival probability are age-dependent. Numerical simulations are used to illustrate the fact that the magnitude of the pure time preference determines the age- profile of the value of parametric changes in the survival probability. The value of such changes is decreasing or increasing in age depending on the magnitude of the time preference.

Keywords: Comparative dynamics; risk; age-dependency

JEL-codes: I10; D61; D81; C61

21 pages, April 1995

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