Rational Impatience ?

Antoine Bommier (1)

1 GREMAQ - Groupe de recherche en économie mathématique et quantitative

This paper introduces a life-cycle model where impatience, instead of being driven by an exogenous discount function, results from the combination of risk aversion and mortality risks. Opting for such a formulation provides novel views on the impact of longevity extension on welfare, saving behavior and capital accumulation. In particular, we show that longevity extension may have much larger impacts on capital accumulation and equilibrium rate of interest than is usually thought. Moreover, we show that the adherence to the additive life cycle model introduced by Yaari (1965) may lead to significantly overstimating the welfare gains due to mortality risk reduction.

Domains: Economics and Finance

Antoine Bommier. Rational Impatience ?. 2008. ⟨hal-00441880⟩