How powerful is demography? The Serendipity Theorem revisited
Abstract
Introduced by Samuelson (Int Econ Rev 16(3):531-538, 1975), the Serendipity Theorem states that the competitive economy will converge towards the optimum steady-state provided the optimum fertility rate is imposed. This paper aims at exploring whether the Serendipity Theorem still holds in an economy with risky lifetime. We show that, under general conditions, including a perfect annuity market with actuarially fair return, imposing the optimum fertility rate and the optimum survival rate leads the competitive economy to the optimum steady state. That Extended Serendipity Theorem is also shown to hold in economies where old adults work some fraction of the old age, whatever the retirement age is fixed or chosen by the agents.