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Fair Accumulation under Risky Lifetime

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  • Gregory Ponthiere

Abstract

Individuals save for their old days, but not all of them enjoy the old age. This paper characterizes the optimal capital accumulation in a two-period OLG model where lifetime is risky and varies across individuals. We compare two long-run social optima: (1) the average utilitarian optimum, where steady-state average welfare is maximized; (2) the egalitarian optimum, where the welfare of the worst-o¤ at the steady-state is maximized. It is shown that, under plausible conditions, the egalitarian optimum involves a higher capital and a lower fertility than the utilitarian optimum. Those inequalities hold also in a second-best framework where survival conditions are exogenously linked to the capital level.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 60 (2013)
Issue (Month): 2 (05)
Pages: 210-230

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Handle: RePEc:bla:scotjp:v:60:y:2013:i:2:p:210-230

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  1. David de la CROIX & Pierre PESTIEAU & Gregory PONTHIERE, 2009. "How Powerful is Demography? The Serendipity Theorem Revisited," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009040, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Marc Fleurbaey & Marie-Louise Leroux & Grégory Ponthière, 2010. "Compensating the Dead? Yes we can!," IDEP Working Papers 1005, Institut d'economie publique (IDEP), Marseille, France, revised 20 Oct 2010.
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  16. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers 12378, Iowa State University, Department of Economics.
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