Life expectancy, human capital, social security and growth

We analyze the effects of changes in the mortality rate upon life expectancy, education, retirement age, human capital and growth in the presence of social security. We build a vintage growth, overlapping generations model in which individuals choose the length of education and the age of retirement, and where unfunded social security pensions depend on workers' past contributions. Social security has a positive effect on education, but pension benefits favor reductions in retirement age. The net effect is that starting from a benchmark case, higher life expectancies give rise to lower per capita GDP growth in the presence of social security as the share of the active population is reduced. In addition, higher social security contribution rates reduce the growth rate of per capita GDP. (c) 2006 Elsevier B.V. All rights reserved.