Scandinavian Working Papers in Economics

Discussion Papers on Economics,
University of Southern Denmark, Department of Economics

No 3/2011: Life expectancy and income: The Ben-Porath mechanism revisited

Casper Worm Hansen () and Lars Lønstrup ()
Additional contact information
Casper Worm Hansen: Department of Business and Economics, Postal: Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark
Lars Lønstrup: Department of Business and Economics, Postal: Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark

Abstract: In this paper we show that it may be optimal for individuals to educate themselves more and decrease future labor supply (choose earlier retirement) when life expectancy increases. This result reconciles the findings of Hazan [Hazan, M., 2009. Longevity and Lifetime Labor Supply: Evidence and Implications. Econometrica 77, 1829.1863] with theory. Further, the paper contributes to a better understanding of the conflicting empirical findings on the causal effect on income per capita from increased life expectancy.

Keywords: Life-cycle model; life expectancy; schooling; retirement

JEL-codes: D91; J22; J24; J26; O11

14 pages, February 16, 2011

Note: Link: http://static.sdu.dk/mediafiles//8/1/0/%7B810F9BC8-342F-4A34-84E2-A9CF4054163D%7Ddpbe3_2011.pdf

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