the effect of life expectancy on fertility saving schooling and economic growth theory and evidence we construct a simple growth model where agents with uncertain survival choose schooling time life cycle consumption and the number of children we show that rising longevity reduces fertility but raises saving schooling time and the growth rate at a diminishing rate cross section analyses using data from 76 countries support these propositions life expectancy has a significant positive effect on the saving rate secondary school enrollment and growth but a significant negative effect on fertility through sensitivity analyses the effect on the saving rate is inconclusive while the effects on the other variables are robust and consistent these estimated effects are decreasing in life expectancy

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

health education and life cycle savings in the development process this paper studies investment in health and human capital in a life cycle model health investment enhances survival to old age by improving health from its endowed level the model predicts two distinctive phases of development when income is low enough the economy has no health investment and little savings leading to slow growth when income grows health investment will become positive and the saving rate will rise leading to higher life expectancy and faster growth a health subsidy can move the economy from the first phase to the next subsidies on health and human capital investments can improve welfare

demographics productivity growth and the macroeconomic equilibrium i introduction the demographics in the united states are as in other industrial countries experiencing drastic changes the birth rate is falling while life expectancy is rising as a consequence the ratio of the elderly to the working age population is projected to rise sharply in the next fifty years the aging of the population imposes both real and imagined burdens on the economy aaron 1990 most importantly it is predicted to cause substantial increases in the tax rates needed to sustain existing social security benefits thereby bringing about an increase in conflict between the working and the elderly generations wildasin 1991 von weizsacker 1990 and verbon 1988 population aging also means it is more likely that the pay as you go system of financing social security will be dynamically inefficient hu 1993 in this case the economy is better served by switching to another financing system indeed a number of countries most notably chile have chosen to privatize their state pension systems more broadly there is evidence that the changing age distribution in the u s population has significantly affected consumption housing investment money demand and the labor force participation rate fair and dominguez 1991 and is potentially very important for explaining the u s rate of national saving for the next fifty years auerbach and kotlikoff 1990 it also affects capital accumulation by causing changes in family insurance and intergenerational trade ehrlich and lui 1991 existing studies of the economic effects of demographics assume either that both work hours and retirement behavior are exogenous or that work hours are endogenous but retirement behavior is exogenous for example cutler poterba sheiner and summers 1990 model the labor market effects of population aging by imposing the projected age distributions on the current labor force participation rates across age cohorts rather than on those corresponding to the projected demographics as such they implicitly assume exogenous work hours and concentrate on the age distribution effect of population aging auerbach and kotlikoff 1990 set an exogenous retirement age of sixty five although they allow endogenous determination of work hours feldstein 1980 provides evidence that incorporation of induced retirement improves the prediction of how social security affects capital accumulation likewise studies of the effects of demographic changes and their interactions with social security will be more fruitful if retirement decisions are explicitly recognized this is particularly true since the 1983 amendment to the social security act would gradually relax the retirement test thus removing the distortions that prevent retirement decisions from adjusting to changing demographics this paper provides a computational study of the effects of demographics on the macroeconomic equilibrium and welfare within the framework of an intertemporal optimizing model with age heterogeneity and endogenous productivity growth the model extends tobin 1967 and cass and yaari 1967 to allow for endogenous retirement decisions it differs from hu 1978 1993 in that it incorporates endogenous productivity growth a key feature that differentiates this analysis from previous studies is that retirement decisions are characterized by a binary choice of whether to work or not to work but work hours are exogenous during working years 1 to facilitate comparisons we also provide a simulation which shows what would happen if social security provisions were such as to prevent the retirement age from adjusting to the demographic changes to study the effects of demographics on the macroeconomic equilibrium involves explaining their effects on the labor force participation rate and aggregate consumption their interactions with social security and their implications for the welfare of the economy

why market valuation indifferent indexing works using market values for indexing gives more portfolio weight to the stocks with positive price errors and less portfolio weight to the stocks with negative price errors market valuation indifferent indexing such as equal weighting or weighting by number of employees number of customers or sales relies on averaging over hundreds of stocks to give equal weight to the two groups

multiscale behaviour of volatility autocorrelations in a financial market abstract we perform a scaling analysis on nyse daily returns we show that volatility correlations are power laws on a time range from one day to one year and more important that the exponent is not unique consistently with a multiscale behaviour

mortality decline and long run economic growth this paper examines the impacts of mortality decline on long run growth in a dynastic family two sector growth model with social security a rise in longevity has direct effects on fertility human capital investment and growth as well as indirect effects through increasing unfunded social security contributions both the direct and indirect effects depend on the relative strength of the tastes for the number and welfare of children and may have different signs the net effects of rising longevity on fertility tend to be negative but positive on human capital investment and growth c 2001 elsevier science s a all rights reserved

fundamentally flawed indexing fundamental indexers argue that capitalization weighting is an inferior investment strategy because it necessarily invests more in overvalued stocks and less in undervalued stocks this article shows that this claim is false capitalization weighting does not by itself create a performance drag

life expectancy and human capital evidence from the international epidemiological transition exploiting preintervention variation in mortality from various infectious diseases together with the time variation arising from medical breakthroughs in the late 1940s and the 1950s this study examines how a large positive shock to life expectancy influenced the formation of human capital within countries during the second half of the 20th century the results establish that the rise in life expectancy was behind a significant part of the increase in human capital over this period according to the baseline estimate for one additional year of life expectancy years of schooling increase by 0 17 year moreover the evidence suggests that declines in pneumonia mortality are the underlying cause of this finding indicating that improved childhood health increases human capital investments

demographic change human capital accumulation and r d based growth employing an overlapping generations model of r d based growth with endogenous fertility and education decisions we examine how demographic changes induced by an increase in life expectancy influence the long run growth rate of the economy we demonstrate that life expectancy when relatively low high positively negatively affects economic growth this paper also compares the growth implications of child education subsidy policies i e policies for enhancing basic education and child rearing subsidy policies i e pro natal policies and demonstrate that while the child education subsidies consistently foster economic growth child rearing subsidies may negatively affect economic growth

cause of death and development in the us abstract exploiting cross state variation in infectious causes of death along with time variation arising from medical innovations toward the middle of the twentieth century this study examines the consequences of a positive health shock in the us it establishes that states with higher levels of mortality from infectious causes prior to the onset of the era of big medicine experienced greater increases in life expectancy population and total gdp after its onset whereas per capita gdp remained largely unchanged together the evidence suggests that the rise in life expectancy had no significant effect on living standards in the us during the time period 1940 1980 these results are robust to controlling for initial health and initial economic conditions

the relation between wealth and health evidence from a world panel of countries abstract based on a world sample of countries this paper presents panel data evidence that documents a u shaped relation between gdp per capita wealth and life expectancy health the evidence also shows that excluding the possibility of a nonmonotonic relationship induces erroneous conclusions about the time varying wealth health correlation

longevity and life cycle savings we add health and longevity to a standard model of life cycle saving and show that under plausible assumptions increases in life expectancy lead to higher savings rates at every age even when retirement is endogenous in a stationary population these higher savings rates are offset by increased old age dependency but during the disequilibrium phase when longevity is rising the effect on aggregate savings rates can be substantial we find empirical support for this effect using a cross country panel of national savings rates

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

intergenerational trade longevity and economic growth we develop an overlapping generations model of endogenous growth in which human capital is the engine of growth and the generations are linked through material and emotional interdependencies within the family parents invest in their children to achieve both old age support care and emotional gratification and material support from children is determined through self enforcing implicit contracts we show that optimal intergenerational trade can then lead to maximization of growth opportunities our model produces a theory of the demographic transition linking longevity fertility and economic growth we also show that while population aging may raise the growth rate an increase in young age longevity is likely to produce a greater increase in the growth rate and a reduction in the fertility rate in a growth equilibrium these predictions and the model s implications concerning the behavior of private savings during the takeoff period appear consistent with empirical evidence

from malthus to modern growth can epidemics explain the three regimes we model demographic and economic long run development in a setting where mortality is endogenous and subject to epidemic shocks the model replicates the full transition from malthusian stagnation to modern growth consistent with the historical facts the economy also passes an intermediate post malthusian phase where growth rates of both population and per capita income increase simultaneously as mortality rates fall and become less volatile the escape from the malthusian trap is the result of a series of mild epidemic shocks making it inevitable at some stage but its timing random calibrations show that it can differ by thousands of generations absent differences in exogenous parameters

elderly labor supply and fertility decisions in aging population economies with a longer life expectancy individuals who plan to work when they are old may increase the number of their children therefore when individuals choose the time of retirement the fertility rate may not necessarily decline but even rise

education lifetime labor supply and longevity improvements this paper presents an analysis of the differential role of mortality for the optimal schooling and retirement age when the accumulation of human capital follows the so called ben porath mechanism we set up a life cycle model of consumption and labor supply at the extensive margin that allows for endogenous human capital formation this paper makes two important contributions first we provide the conditions under which a decrease in mortality leads to a longer education period and an earlier retirement age second those conditions are decomposed into a ben porath mechanism and a lifetime human wealth effect vs the years to consume effect finally using us and swedish data for cohorts born between 1890 and 2000 we show that our model can match the empirical evidence

social security and endogenous growth abstract this paper examines the effects of social security on the steady state growth of per capita income in an endogenous growth model in which agents care about their own consumption the number of children and the welfare of each child it shows that an unfunded program may simulate growth by reducing fertility and increasing the ratio of human capital investment per child to per family income when bequests are positive also it may cause faster growth than funded programs especially when receipts from funded programs are independent of contributions when voluntary saving is positive funded social security is neutral if receipts are linked to contributions and most likely depresses growth if receipts are independent of contributions

life expectancy and endogenous growth we consider an overlapping generations model with uncertain lifetime and endogenous growth individuals have to choose the length of time devoted to schooling before starting to work we show that it depends positively on life expectancy but that the positive effect of a longer life on growth could be offset by a decrease in the participation rate dynamics are characterized by a delay differential equation and human capital converges with oscillations to a balanced growth path

why fundamental indexation might or might not work some proponents of fundamental indexation claim that the strategy is based on a new theory in which market prices of stocks deviate from fair values a key assumption in this approach is that fundamental weights are unbiased estimators of fair value weights that are statistically independent of market values this article demonstrates that except in trivial cases this assumption is internally inconsistent because the sources of the errors are also determinants of market values the article shows under what conditions fundamental weights are better or worse estimators of fair value weights than are market value weights thereby demonstrating that the new theory is merely a conjecture a formula is developed for the value bias inherent in fundamental weighting and two approaches to combining fundamental and market values are discussed

endogenous fertility and optimal population size pareto optimality which is the standard criterion of efficiency in general equilibrium models takes population size as given and therefore cannot be directly applied to analyze the question of optimal population size the criterion then for optimal population size must be based on a more restrictive definition of optimality this paper extends peter diamonds 1965 golden golden rule growth model by assuming that individuals derive utility from their own consumptionand from their own children offspring are assumed to consume resources before reaching adulthood the authors show that the optimal steady state utility yields a higher population growth rate when it converges to the golden rule allocation they then demonstrate that a voluntary social security program in which the size of the transfer to a particular agent is directly tied to his own fertility leads the competitive allocation to be identical to the allocation corresponding to the maximum of the steady state utility of the representative individual

the rise in life expectancy and economic growth in the 20th century this research exploits conditional exogenous variation in mortality from the diffusion of modern medicine to study the effect of growth in life expectancy on the growth in gdp per capita the empirical analysis establishes that countries that obtained higher growth rates of life expectancy due to this shock to mortality in the mid twentieth century experienced lower growth rates of gdp per capita in the second half of the twentieth century in addition a negative relationship between initial level of life expectancy and the subsequent growth rate of gdp per capita is found

life expectancy human capital social security and growth we analyze the effects of changes in the mortality rate upon life expectancy education retirement age human capital and growth in the presence of social security we build a vintage growth overlapping generations model in which individuals choose the length of education and the age of retirement and where unfunded social security pensions depend on workers past contributions social security has a positive effect on education but pension benefits favor reductions in retirement age the net effect is that starting from a benchmark case higher life expectancies give rise to lower per capita gdp growth in the presence of social security as the share of the active population is reduced in addition higher social security contribution rates reduce the growth rate of per capita gdp

vintage human capital demographic trends and endogenous growth we study how economic growth is affected by demographics in an overlapping generations model with a realistic survival law individuals optimally chose the dates at which they leave school to enter the labor market and at which they retire endogenous growth arises thanks to the accumulation of generation specific human capital favorable shifts in the survival probabilities always induce longer schooling and later retirement but have an ambiguous effect on growth the relationship between the growth of population and per capita growth is hump shaped increases in longevity can be responsible for a switch from a no growth regime to a sustained growth regime and for a positive relationship between fertility and growth to vanish

optimal social security in a dynastic model with human capital externalities fertility and endogenous growth abstract in this paper we investigate the optimal scale of pay as you go social security in a dynastic family model with human capital externalities fertility and endogenous growth human capital externalities reduce the return to human capital investment and hence lead to under investment in human capital and over reproduction of the population if the taste for the number of children is sufficiently weak relative to the taste for the welfare of children social security can be welfare enhancing by reducing fertility and raising human capital investment per child