We are grateful to Michael Bar, Rauf Boucekkine, Giacomo Calzolari, David de la Croix, Matthias Doepke, Bernd Fitzenberger, Andreas Irmen, Oksana Leukhina, Omar Licandro, Alexander Ludwig, Sebnem Kalemli-Oczan, Giovanni Prarolo, Gesine Stephan, Rodrigo Soares, Rudi Stracke, Tito Pietra, Paolo Vanin, and five anonymous referees for extensive comments. We would also like to thank seminar participants at St. Gallen, Munich, the workshop “Towards Sustained Growth” in Barcelona, the LEPAS 2010 workshop in Vienna, the European Workshop on Labor Markets and Demographic Change, the VfS annual meetings in Göttingen and St. Gallen (Population Council), the MPI-Sire workshop on aging, and the 2013 Labor Economics Seminar in Lech for helpful comments and suggestions. Funding from EIEF is gratefully acknowledged.
Life Expectancy, Schooling, and Lifetime Labor Supply: Theory and Evidence Revisited
Version of Record online: 18 SEP 2013
© 2013 The Econometric Society
Volume 81, Issue 5, pages 2055–2086, September 2013
How to Cite
Cervellati, M. and Sunde, U. (2013), Life Expectancy, Schooling, and Lifetime Labor Supply: Theory and Evidence Revisited. Econometrica, 81: 2055–2086. doi: 10.3982/ECTA11169
- Issue online: 18 SEP 2013
- Version of Record online: 18 SEP 2013
- Manuscript received October, 2012; final revision received March, 2013.
- life expectancy;
- lifetime labor supply;
- rectangularization of the survival function
This paper presents a theoretical and empirical analysis of the role of life expectancy for optimal schooling and lifetime labor supply. The results of a simple prototype Ben-Porath model with age-specific survival rates show that an increase in lifetime labor supply is not a necessary, or a sufficient, condition for greater life expectancy to increase optimal schooling. The observed increase in survival rates during working ages that follows from the “rectangularization” of the survival function is crucial for schooling and labor supply. The empirical results suggest that the relative benefits of schooling have been increasing across cohorts of U.S. men born between 1840 and 1930. A simple quantitative analysis shows that a realistic shift in the survival function can lead to an increase in schooling and a reduction in lifetime labor hours.