Economic Growth and Longevity Risk with Adverse Selection

We study a closed economy featuring heterogeneous agents and exhibiting endogenous economic growth due to interfirm external effects. Individual agents differ in terms of their mortality profile. At birth, nature assigns a health status to each agent. Health type is private information and annuity firms can only observe an agent’s age. In the presence of longevity risk, agents want to annuitize their wealth conform the classic result by Yaari (1965). In the first-best case with perfect annuities, the market would feature a separating equilibrium (SE) in which each health type obtains an actuarially fair perfect insurance. In the SE all agents are savers throughout their lives. The informational asymmetry precludes the attainment of the first-best equilibrium, however, as healthy individuals have a strong incentive to misrepresent their type by claiming to be unhealthy. Using the equilibrium concept of Pauly (1974) and Abel (1986), we prove the existence of a second-best pooling equilibrium (PE) in which individuals of all types annuitize at a common pooling rate. As the unhealthy get close to their maximum attainable age, the pooling rate prompts such individuals to become net borrowers. But borrowing would reveal their health status, so the best the unhealthy can do is to impose a borrowing constraint on themselves during their autumn years. Using a plausibly calibrated version of the model we find that the growth- and welfare effects of PE versus SE are rather small, whilst those of PE versus no annuities at all (NAE) are rather large. An imperfect insurance is better than no insurance at all, both at the microeconomic and at the macroeconomic level.annuity markets, adverse selection, endogenous growth, overlapping generations, demography

Testing for inherited thrombophilia does not reduce the recurrence of venous thrombosis\ud

Background: Inherited thrombophilia is only weakly associated with recurrence in patients with a first venous thrombosis (VT). In spite of this, thrombophilia testing is often performed in these patients. Positive results may influence patient management such as prolonged anticoagulant treatment or intensified prophylaxis in high-risk situations. Objective: To investigate whether thrombophilia testing reduces the risk of recurrent VT by virtue of these management alterations. Methods: From a large case–control study of patients (MEGA study), aged 18–70 years, with a first VT between 1999 and 2004, we selected 197 patients who had had a recurrence during follow-up. We compared the incidence of thrombophilia testing to that of a control cohort of 324 patients. We calculated the odds ratio (OR) for recurrent thrombosis in tested vs. non-tested patients. Only patients who were tested before recurrence were regarded as tested. All first and recurrent thrombotic events were objectively confirmed. Results: Thrombophilia tests were performed in 35% of cases and in 30% of controls. The OR for recurrence was 1.2 [95% confidence interval (CI) 0.9–1.8] for tested vs. non-tested patients. After correction for age, sex, family history, geographic region, presence of clinical risk factors, and year of first VT, the OR remained unchanged. Discussion: Thrombophilia testing in patients with a first VT does not reduce the incidence of recurrence in clinical practice.\u

The Tragedy of Annuitization

We construct a tractable discrete-time overlapping generations model of a closed economy and use it to study government redistribution of accidental bequests and private annuities in general equilibrium. Individuals face longevity risk as there is a positive probability of passing away before the retirement period. We find non-pathological cases where it is better for long-run welfare to waste accidental bequests than to give them to the elderly. Next we study the introduction of a perfectly competitive life insurance market offering actuarially fair annuities. There exists a tragedy of annuitization: although full annuitization of assets is privately optimal it is not socially beneficial due to adverse general equilibrium repercussions.longevity risk, risk sharing, overlapping generations, intergenerational transfers, annuity markets

Electronic optics in graphene in the semiclassical approximation

We study above-barrier scattering of Dirac electrons by a smooth electrostatic potential combined with a coordinate-dependent mass in graphene. We assume that the potential and mass are sufficiently smooth, so that we can define a small dimensionless semiclassical parameter $h \ll 1$. This electronic optics setup naturally leads to focusing and the formation of caustics, which are singularities in the density of trajectories. We construct a semiclassical approximation for the wavefunction in all points, placing particular emphasis on the region near the caustic, where the maximum of the intensity lies. Because of the matrix character of the Dirac equation, this wavefunction contains a nontrivial semiclassical phase, which is absent for a scalar wave equation and which influences the focusing. We carefully discuss the three steps in our semiclassical approach: the adiabatic reduction of the matrix equation to an effective scalar equation, the construction of the wavefunction using the Maslov canonical operator and the application of the uniform approximation to the integral expression for the wavefunction in the vicinity of a caustic. We consider several numerical examples and show that our semiclassical results are in very good agreement with the results of tight-binding calculations. In particular, we show that the semiclassical phase can have a pronounced effect on the position of the focus and its intensity.Comment: 103 pages, 11 figure

Life in Shackles? The Quantitative Implications of Reforming the Educational Loan System

In this paper we conduct a quantitative analysis of a number of stylized educational loan systems. We develop a stochastic general equilibrium model of a closed economy with a competitive firm sector and a government that levies taxes and administers educational loans. Individuals are heterogeneous in their talent for education and ability to learn on the job and face uninsurable idiosyncratic labour productivity risk during their working career. We calibrate the model to the US mortgage loan system and subsequently consider two possible reforms. The first is a Graduate Labour Tax (GLT) system whereby grants to students are financed by means of a tax on the labour income of educated individuals. We find that in the long run the proportion of uneducated workers stays roughly constant but the average educational attainment of students increases. As there exists a considerable amount of transitional dynamics in the model the welfare effects of the reform differ by generation. Cohorts alive at the time of the shock are worse off while ex-ante welfare of future cohorts increases. The gains to the latter are large enough to - at least in principle - compensate the losers from the policy reform and generate an overall welfare gain. The second possible reform we study is a Comprehensive Labour Tax (CLT). It is very similar to the GLT except for the fact that the educational tax is levied on all workers, including those who are uneducated. In contrast to the GLT reform the proportion of uneducated workers drops substantially. Generations that become economically active soon after the policy reform are worse off and the aggregate ex-ante welfare effect is negative

Human capital accumulation and the macroeconomy in an ageing society

How do population ageing shocks affect the long-run macroeconomic performance of an economy? To answer this question we build a general equilibrium overlapping generations model of a closed economy featuring endogenous factor prices. Finitely-lived individuals are endowed with perfect foresight and make optimal choices over the life cycle. In addition to selecting age profiles for consumption and the hours of time supplied to the labour market, they also choose their schooling level and retirement age. Human capital is accumulated as a result of work experience, the extent of which is determined by the intensity of labour supply. As the agent gets older, biological deterioration sets in and human capital depreciates at an increasing rate. This ultimately prompts the agent to withdraw from the labour market. The microeconomic and macroeconomic effects of three ageing shocks are studied, namely a biological longevity boost, a comprehensive longevity boost, and a baby bust. Robustness checks are performed by allowing for capital market imperfections and indivisibility of labour supply

Longevity Shocks with Age-Dependent Productivity Growth

The aim of this paper is to study the long-run effects of a longevity increase on individual decisions about education and retirement, taking macroeconomic repercussions through endogenous factor prices and the pension system into account. We build a model of a closed economy inhabited by overlapping generations of finitely-lived individuals whose labour productivity depends on their age through the build-up of labour market experience and the depreciation of human capital. We make two contributions to the literature on the macroeconomics of population ageing. First we show that it is important to recognize that a longer life need not imply a more productive life and that this matters for the affordability of an unfunded pension system. Second, we find that factor prices could move in a direction opposite to the one accepted as conventional wisdom following an increase in longevity, depending on the corresponding change in the age-productivity profile

Optical evidence of surface state suppression in Bi based topological insulators

A key challenge in condensed matter research is the optimization of topological insulator (TI) compounds for the study and future application of their unique surface states. Truly insulating bulk states would allow the exploitation of predicted surface state properties, such as protection from backscattering, dissipationless spin-polarized currents, and the emergence of novel particles. Towards this end, major progress was recently made with the introduction of highly resistive Bi$_2$Te$_2$Se, in which surface state conductance and quantum oscillations are observed at low temperatures. Nevertheless, an unresolved and pivotal question remains: while room temperature ARPES studies reveal clear evidence of TI surface states, their observation in transport experiments is limited to low temperatures. A better understanding of this surface state suppression at elevated temperatures is of fundamental interest, and crucial for pushing the boundary of device applications towards room-temperature operation. In this work, we simultaneously measure TI bulk and surface states via temperature dependent optical spectroscopy, in conjunction with transport and ARPES measurements. We find evidence of coherent surface state transport at low temperatures, and propose that phonon mediated coupling between bulk and surface states suppresses surface conductance as temperature rises.Comment: 13 pages, 10 figure

Optical investigation of thermoelectric topological crystalline insulator Pb0.77_{0.77}Sn0.23_{0.23}Se

Pb$_{0.77}$Sn$_{0.23}$Se is a novel alloy of two promising thermoelectric materials PbSe and SnSe that exhibits a temperature dependent band inversion below 300 K. Recent work has shown that this band inversion also coincides with a trivial to nontrivial topological phase transition. To understand how the properties critical to thermoelectric efficiency are affected by the band inversion, we measured the broadband optical response of Pb$_{0.77}$Sn$_{0.23}$Se as a function of temperature. We find clear optical evidence of the band inversion at $160\pm15$ K, and use the extended Drude model to accurately determine a $T^{3/2}$ dependence of the bulk carrier lifetime, associated with electron-acoustic phonon scattering. Due to the high bulk carrier doping level, no discriminating signatures of the topological surface states are found, although their presence cannot be excluded from our data.Comment: 11 pages, 6 figure