A mixed blessing of lifespan heterogeneity

Human mortality data reveal that life expectancy in industrialized countries has been converging to a common value. Yet, significant variations in the distributions of adult life-table ages at death among some developed countries have also been observed. This paper, largely motivated by Japan's mortality data, presents a general equilibrium, overlapping-generations model that assesses the welfare effects of the mean-preserving declines in the variance of the distribution of adult ages at death. Our quantitative exercise reveals that for a given value of the economy-wide life expectancy, the individual welfare effects due to switching from high to low-variance steady states are length of life-dependent, quite sensitive to the average economy-wide retirement age, and strongly influenced by associated changes in the labor supply, factor prices, and lifetime earnings.