Life expectancy, money, and growth

We examine the effect of an increase in life expectancy on portfolio choices of individuals and, thereby, on economic growth in a simple endogenous growth model populated by overlapping generations, in which money is introduced based on the money-in-the-utility-function approach. It is shown that an increase in longevity raises the balanced growth rate and lowers the inflation rate, offsetting the Tobin effect, if spillovers from accumulated capital to labor productivity sufficiently raise wage income and real savings, and, if not, it may retard economic growth and aggravate inflation. Under plausible conditions, the former will be the case.