DP9399 Life Expectancy, Schooling, and Lifetime Labor Supply: Theory and Evidence Revisited

Author(s): Matteo Cervellati, Uwe Sunde
Publication Date: March 2013
Keyword(s): Life Expectancy, Lifetime Labor Supply, Longevity, Rectangularization of the Survival Function, Schooling
JEL(s): E20, J22, J24, J26, O11
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9399

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, nor 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 US man born 1840-1930. 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.