On the effects of changing mortality patterns on investment, labour and consumption under uncertainty

•We study consumption, labour and portfolio decisions in presence of mortality risk.•Use UK actuarial life tables spanning the time period from 1951-2060.•Historical changes in mortality cause significant changes in the agent's decisions.•Changes contribute up to 5% to GDP growth during the period from 1980 until 2010.

In this paper we extend the consumption-investment life cycle model for an uncertain-lived agent, proposed by Richard (1974), to allow for flexible labour supply. We further study the consumption, labour supply and portfolio decisions of an agent facing age-dependent mortality risk, as presented by UK actuarial life tables spanning the time period from 1951-2060 (including mortality forecasts). We find that historical changes in mortality produce significant changes in portfolio investment (more risk taking), labour (decrease of hours) and consumption level (shift to higher level) contributing up to 5% to GDP growth during the period from 1980 until 2010.