Longevity, Growth, and Intergenerational Equity: The Deterministic Case

Abstract

Challenges raised by ageing (increasing longevity) have prompted policy debates featuring policy proposals justified by reference to some notion of intergenerational equity. However, very different policies ranging from pre-savings to indexation of retirement ages have been justified in this way. We develop an overlapping generations model in continuous time which encompasses different generations with different mortality rates and thus longevity. Allowing for both trend increases in longevity and productivity, we address the issue of intergenerational equity under a utilitarian criterion when future generations are better off in terms of both material and non-material well being. Increases in productivity and longevity are shown to have very different implications for intergenerational distribution.JEL classification: J11

Longevity Adjustment of Retirement Age and Intragenerational Inequality

“…In this section, we explore the implications of differences in longevity across groups and lifetime utility when there is a common pension age for the whole population. We set up an overlapping generations (OLG) model, stated in continuous time, and with a heterogeneous population based on Andersen and Gestsson (2016) and Gestsson and Zoega (2018). As in these two papers, we depart from Blanchard (1985) by assuming that the probability of dying increases with age.…”

“…We depart from the basic model in Andersen and Gestsson (2016) by introducing a more realistic mortality profile and splitting the population into two heterogeneous groups. In that paper, no one dies before reaching pension age and thereafter, the size of a cohort gradually reduces until no one is left.…”

Pensions across generations: scenarios for the Maltese Islands

“…Work, leisure, consumption and saving are all assumed to be determined by their anticipated effect on lifetime earnings and wealth, and the rate of return on savings. Andersen and Gestsson (2016) extends the OLG in continuous time with different mortality rates for different generations. They argue that increases in productivity and longevity are shown to have very different implications for intergenerational distribution.…”

Longevity, Retirement and Intra-Generational Equity

“…In this section, we explore the implications of differences in longevity across groups and lifetime utility when there is a common retirement age for the whole population. We set up a overlapping generations (OLG), stated in continuous time, and with a heterogeneous population based on Andersen and Gestsson (2016) and Gestsson and Zoega (2018). We, as well as these two papers, depart from Blanchard (1985) by assuming that the probability of dying increases with age.…”