Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis

Ehrlich, Isaac; Yin, Yong

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Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis

Journal of Risk and Uncertainty, Vol. 31, No. 2, pp. 129-162, September 2005

35 Pages Posted: 7 Feb 2007

See all articles by Isaac Ehrlich

Isaac Ehrlich

State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)

Yong Yin

State University of New York (SUNY), Buffalo - College of Arts & Sciences - Department of Economics

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Abstract

To what extent can life protection account for observed diversities in age-specific life expectancies across individuals and over time? We provide answers via calibrated simulations of a life-cycle model where life's end is stochastic, and age-specific mortality hazards are ndogenous outcomes of life protection, set jointly with life insurance and annuities. Our model links mortality hazards and values of life saving (VLS) as "dual variables", and offers new insights about the measurement of VLS. Life protection is estimated to account for non-trivial portions of observed levels and inequalities in life expectancies and empirical estimates of VLS by age and education, and over time.

Keywords: endogenous mortality, uncertainty, human capital, stochastic optimization, calibrated simulations,

JEL Classification: C6, D8, I1

Suggested Citation: Suggested Citation

Ehrlich, Isaac and Yin, Yong, Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis. Journal of Risk and Uncertainty, Vol. 31, No. 2, pp. 129-162, September 2005, Available at SSRN: https://ssrn.com/abstract=961442