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Probabilistic Aging

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abstract The paper develops an overlapping generations model with probabilistic aging of households. We define age as a set of personal attributes such as earnings potential, health and tastes that are characteristic of a person's position in the life-cycle. In assuming a limited number of different states of age, we separate the concepts of age and time since birth. Agents may retain their age characteristics for several periods before they move with a given probability to another state of age. Different generations that share the same age characteristics are aggregated analytically to a low number of age groups. The probabilistic aging model thus allows for a very parsimonious yet rather accurate approximation of demographic change and of life-cycle differences in earnings, wealth and consumption. Existing classes of overlapping generations models follow as special cases.
   
type discussion paper (English)
   
keywords Overlapping generations, aging, demographics,
life-cycle earnings
   
project Education, Training, and Labor Market Search
date of appearance 15-1-2007
publisher Volkswirtschaftliche Abteilung, Universit├Ąt St. Gallen, CESifo WP No. 1680
page(s) 1-36
review not reviewed
   
citation Keuschnigg, C., Jaag, C., Grafenhofer, D., & Keuschnigg, M. (2007). Probabilistic Aging: Volkswirtschaftliche Abteilung, Universit├Ąt St. Gallen, CESifo WP No. 1680.