Journal of Population Economics

, Volume 29, Issue 3, pp 957–967 | Cite as

“How powerful is demography? The serendipity theorem revisited” comment on De la Croix et al. (2012)

Original Paper

Abstract

Samuelson’s (Int Econ Rev 16(3):531-538, 1975) serendipity theorem states that the “goldenest golden rule” steady-state equilibrium can be obtained by a competitive two-period overlapping generation economy with capital accumulation, provided that the optimal growth rate prevails. De la Croix et al. (J Popul Econ 25:899-922, 2012) extended the scope of the theorem by showing that it also holds for risky lifetime. With this note, we introduce medical expenditure as a determinant of the probability of surviving to old age to prove the theorem. The original as well as all extended versions of the serendipity theorem, however, fail to prove that second-order conditions are satisfied in general. Still, unlike De la Croix et al. (J Popul Econ 25:899-922, 2012), we can exclude the existence of corner solutions where the probability of reaching old age is zero or one. The zero survival probability case becomes irrelevant if the option to randomize between death and life utility is taken into account. Survival with certainty is ruled out if the marginal cost of survival is increasing. Hence, the optimal survival probability represents an interior solution. Furthermore, we show for the optimal survival probability that the value of a statistical life is positive and equal to its marginal cost.

Keywords

Longevity Health expenditure Overlapping generations Value of a statistical life 

JEL classification

E13 H42 H75 I18 J17 

References

  1. Abio G (2003) Interiority of the optimal population growth rate with endogenous fertility. Econ Bull 10(4):1–7Google Scholar
  2. Chakraborty S (2004) Endogenous lifetime and economic growth. J Econ Theory 116:119–137CrossRefGoogle Scholar
  3. De la Croix D, Ponthière G (2010) On the golden rule of capital accumulation under endogenous longevity. Math Soc Sci 59(2):227–238CrossRefGoogle Scholar
  4. De la Croix D, Pestieau P, Ponthière G (2012) How powerful is demography? The serendipity theorem revisited. J Popul Econ 25:899–922CrossRefGoogle Scholar
  5. Deardorff AV (1976) The optimum growth rate for population: comment. Int Econ Rev 17(2):510–515CrossRefGoogle Scholar
  6. Felder S, Mayrhofer T (2011) Medical decision making: a health economic primer. Springer, HeidelbergCrossRefGoogle Scholar
  7. Hall RE, Jones CI (2007) The value of life and the rise in health spending. Q J Econ 122(1):39–72CrossRefGoogle Scholar
  8. Jaeger K, Kuhle W (2009) The optimum growth rate for population reconsidered. J Popul Econ 22(1):23–41CrossRefGoogle Scholar
  9. Michel P, Pestieau P (1993) Population growth and optimality: when does the serendipity theorem hold? J Popul Econ 6(4):353–362CrossRefGoogle Scholar
  10. Murphy KM, Topel RH (2006) The value of health and longevity. J Polit Econ 114(5):871–904CrossRefGoogle Scholar
  11. OECD (2014) Health statistics. ParisGoogle Scholar
  12. Rosen S (1988) The value of changes in life expectancy. J Risk Uncertain 1:285–304CrossRefGoogle Scholar
  13. Samuelson PA (1958) An exact consumption-loan model of interest with or without the social contrivance of money. J Polit Econ 66(6):467–482CrossRefGoogle Scholar
  14. Samuelson PA (1975) The optimum growth rate for population. Int Econ Rev 16(3):531–538CrossRefGoogle Scholar
  15. Schweizer U (1996) Endogenous fertility and the Henry George theorem. J Publ Econ 61:209–228CrossRefGoogle Scholar
  16. Viscusi WK, Aldy JE (2003) The value of saving a life: a critical review of market estimates throughout the world. J Risk Uncertain 27(1):5–76CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.Faculty of Business and EconomicsUniversity of BaselBaselSwitzerland
  2. 2.CINCH, Health Economics Research CenterUniversity of Duisburg-EssenEssenGermany

Personalised recommendations