Skip to main content
Article
Choosing Longevity with Overlapping Generations: To Be or Not to Be in Diamond's Model
The B.E. Journal of Macroeconomics (2010)
  • Weichun Chen, University of Victoria
  • Merwan H Engineer, University of Victoria
  • Ian P King, 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
  • endogenous longevity,
  • overlapping generations,
  • growth
Publication Date
April 1, 2010
Citation Information
Weichun Chen, Merwan H Engineer and Ian P King. "Choosing Longevity with Overlapping Generations: To Be or Not to Be in Diamond's Model" The B.E. Journal of Macroeconomics Vol. 8 Iss. 1 (2010)
Available at: http://works.bepress.com/ian_king/1/