Life expectancy, schooling and lifetime labor supply: the Ben-Porath mechanism revisited

Hansen and Lonstrup [Journal of Population Economics, 2012] construct a three-period, life-cycle model to study the famed Ben-Porath mechanism and attempt to reconcile it with the empirical findings in Hazan [Econometrica, 2009]: increased life expectancy has a positive effect on schooling but a negative effect on expected lifetime labor supply. This paper shows that within the framework of Hansen and Lonstrup (2012), as life expectancy increases, expected lifetime labor supply may not decline even when labor supplies at the two end stages of life do. I fully characterize the conditions under which the model in Hansen and Lonstrup (2012) can produce the empirical findings in Hazan (2009).