Workpackages (WP)
WP 1: Coordination and project management
Planning, implementation and coordination of project activities. Monitoring project progress and budgeted resources.
Participants: LUH.
WP 2: Ageing, Senescence, and Frailty: What can Economics learn from the Natural Sciences?
This WP provides an overview over recent developments on the modeling of the aging process in physics, biology, gerontology, and bio-demography with a special focus on the question of which ideas can be fruitfully borrowed for an implementation of ageing in economic models. Economists usually treat mortality and life-span parametrically thereby ignoring the fact that these phenomena are endogenous variables determined by age, disease environment, food intake, etc. The natural sciences on the other hand have always understood aging as progressive deterioration of the body which is manifested in age-dependent mortality rates. Recently natural scientists came up with formal representations of deep foundations of the aging process which are still simple enough to be potentially integrated in economic models of the life cycle. These theories relate mortality to accumulated deficits, morbidity, frailty, and physical fitness. It can be expected that their consideration in economic models will allow a much deeper investigation of longevity, life-quality, age-dependent productivity, health demand, and effectiveness of health expenditure than currently available.
Participants: LUH, UCPH, UA.
WP 3: Accounting for Increasing Life-Expectancy
This WP aims to elucidate the sources of recent increases in life expectancy. Life expectancy has risen tremendously over the last 160 years. Undoubtedly, technology has played an important role in prolonging life-spans. But how much of the frontier increase can be accounted for by improvements in technology and nutrition? Gaining insights into the sources of past increases, and their relative magnitudes, is interesting on its own. It is also important, however, in the context of modeling the interaction between technology and biology in human aging, which the over-all project aims to. The biological literature on allometric scaling will be drawn upon in attempting to pin down the biological drivers of the mortality decline, such as the lowering in energy expenditure brought forth by the demographic transition.
Participants: UCPH.
WP 4 An Economic Life-Cycle Model of Aging and Senescence
This WP construct upon WP1 to provide a general framework to dig deeper on the consequences of the aging society on the European economy. More specifically, it merges the concept of aging in the biological sense of deteriorating physical and mental quality of the human body and the economic rational behavior of agents along their lives. The proposed framework will follow the basic structure of standard economic growth models of the life cycle; but it will be enriched with new key ingredients extracted from the natural sciences (WP2). This is something that we believe is crucial if Europe wants to have any chance to understand the consequences of its aging society on the European economy. The framework will then be solved to study how biological aging affects our decision making on fertility, savings, retirement, education, investment and economic growth in the absence of public policy. In sum, it will analyze how Europe's future prospects of (i) disability-free life-expectancy and (ii) disability-adjusted life expectancy affect expectations of long-run socio-economic performance.
Participants: LUH, UCPH, UA, VID.
WP 5 Ageing and Retirement
This WP analyzes the optimal age of retirement from the individual's and from society's viewpoints, and also the effect and sustainability of pension plans. It takes the new framework (from WP 4) a step further. It will study how policies related to retirement affect economic performance and how, in turn, economic outcomes affect retirement. Therefore, we will be able to provide information about the optimal age of retirement from the individual's as well as from society's point of view We will build on the literature on the evolution of the optimal age of retirement and its relationship with longevity. This literature has emphasized pension programs, the wage profile, labor productivity, and risk of mortality as main factors that affect retirement. We will apply our new framework to reexamine the importance of these factors, and to generate new insights about the impact of the evolution of senescence on retirement.
Participants: LUH, UA.
WP 6 The effect of Immigration on the European Aging Society
One of the challenges of Europe is to maintain a sizable productivity-adjusted labor force in the long-run. Migratory flows are one of the key elements in the determination of the size and the "skilled-unskilled" composition of the labor force in most European countries. Migratory flows of workers affect not only employment and wages in the destination country but also in the origin country, thereby influencing future migratory flows, employment and productivity. Moreover, an inflow (outflow) of workers can have a positive or negative effect on the wage premium of skilled workers depending, among other things, on the relative education level of migrants (non-migrants) and so its influence on the evolution of productivity is ambiguous. Therefore, a permanent migration of workers can contribute to alleviate or to exacerbate the social cost of human capital depreciation associated to society's ageing. Motivated by the above issues, this WP builds on WP4, proposing a two-country framework to study the size and sign of the effects of migration on the long-run income and productivity of each (developed/developing) economy in a context of free international trade and migration. We will take into account the interaction between the labor markets in the origin and in the destination countries and a broader concept of human capital, evaluating the welfare gains or loses implied by some European trade policy measures and migration restrictions. The WP will try to calibrate and simulate the model using European data to measure the most likely impact of migration flows on European labor productivity.
Participants: UA.
WP 7 Endogenous R&D-driven Growth in an Ageing Society
According to the standard economic model, R&D-driven growth is fuelled by positive population growth. If this would be true indeed, Europe's future growth prospects would be grim given that in most member countries population growth is close to zero or even negative. However, it is least conceivable that an aging society can make up for missing population growth. This is particularly convincing if aging is "successful" in the sense of delayed physical and mental deterioration. In this case, increasing disability-free longevity of subsequent cohorts of researchers provides access to knowledge and ideas over a longer period of time. This WP provides an R&D-based model of endogenous growth for an ageing society and investigates to what extend "longevity-driven growth" is indeed a theoretical option.
Participants: LUH, UCPH, UA.
WP 8 Health, Survival and Consumption over the Life Cycle
In recent years most industrialized countries have allocated increasing shares of their GDP to health while at the same time life-expectancy has continued to increase. The ongoing debate in health economics is on whether too much is spent on health care. This begs two questions: (i) what motivates individuals to invest in reductions in mortality and to what effect? (ii) Do they get it right from a social welfare point of view? Linked to WP 2 and WP 4 we develop a framework that allows to determine how a social planner as opposed to an individual allocates resources to consumption vs. the provision of health care over the life cycle assuming that health care positively affects longevity and individual productivity. We therefore combine the biological and technological explanation of mortality decline with the literature on the "demand for longevity".
Participants: LUH, VID.
WP 9 Dissemination of Results
Organization of expert meetings and conferences, Preparation of summaries, newsletters, and policy briefs presenting the results of the project. Coordination and editing of a scientific book summarizing the findings.
Participants: LUH, UCPH, UA, VID.