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The Effect of Pension on the Optimized Life Expectancy and Lifetime Utility Level

Shin, Inyong (2012): The Effect of Pension on the Optimized Life Expectancy and Lifetime Utility Level.

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Abstract

In this paper, we analyze the effect of a pension system on the life expectancy and the lifetime utility level using a cross country data and an optimal dynamic problem of individuals who live in continuous and finite time. From the data, we find that 1) Happiness can be almost explained by income per capita. 2) Depending on income per capita, the pension system can make life span longer or shorter and can raise or reduce the level of happiness. Our model yields some results which are consistent with the results from the data: i) Life expectancy is not always proportional to lifetime utility. ii) The pension system can make life expectancy longer or shorter. This paper suggests that it is not always true that the pension system improves the lifetime utility level.

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