Endogenous differential mortality, non-contractible effort and non-linear taxation
AbstractThis paper studies a problem of non linear taxation when individuals have different longevities resulting from a non-monetary effort (like exercising). We first present the laissez-faire and the first best. Like Becker and Philipson (1998), we find that the laissez-faire level of effort is too high compared with the first best, because individuals do not internalize the impact of survival on the return of their savings. We also claim that because of its non-monetary form, effort is not contractible. That is why we modify our framework and assume, for the rest of the paper, that effort is determined by the individual while the social planner only allocates consumptions. It turns out that, under full information, a tax on the return of annuitized savings is desirable for both types. This tax is higher for the low-survival individual. Under asymmetric information, the low-survival individual still faces a tax while the high-survival individual might now face a positive or negative tax on annuities. Interestingly, our results depend on the value of life.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal International Tax and Public Finance.
Volume (Year): 18 (2011)
Issue (Month): 1 (February)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=102915
Annuities; Effort; Differential mortality; Non-linear taxation; Value of life; H21; H23; H55; I12;
Other versions of this item:
- Marie-Louise Leroux, 2009. "Endogenous Differential Mortality, Non-Contractible Effort and Non Linear Taxation," CESifo Working Paper Series 2567, CESifo Group Munich.
- LEROUX, Marie-Louise, . "Endogenous differential mortality, non-contractible effort and non-linear taxation," CORE Discussion Papers RP -2286, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I12 - Health, Education, and Welfare - - Health - - - Health Production
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- CREMER, Helmuth & LOZACHMEUR, Jean-Marie & PESTIEAU, Pierre, .
"Social security, retirement age and optimal income taxation,"
CORE Discussion Papers RP
-1722, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2004. "Social security, retirement age and optimal income taxation," Journal of Public Economics, Elsevier, vol. 88(11), pages 2259-2281, September.
- Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2002. "Social Security, Retirement Age and Optimal Income Taxation," CESifo Working Paper Series 693, CESifo Group Munich.
- Cremer, Helmuth & De Donder, Philippe & Maldonado, Darío & Pestieau, Pierre, 2008.
"Taxing Sin Goods and Subsidizing Health Care,"
CEPR Discussion Papers
6777, C.E.P.R. Discussion Papers.
- Helmuth Cremer & Philippe De Donder & Darío Maldonado & Pierre Pestieau, 2008. "Taxing Sin Goods and Subsidizing Health Care," CESifo Working Paper Series 2297, CESifo Group Munich.
- CREMER, Helmuth & DE DONDER, Philippe & MALDONADO, Dario & PESTIEAU, Pierre, 2008. "Taxing sin goods and subsidizing health care," CORE Discussion Papers 2008031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Antoine Bommier & Marie-Louise Leroux & Jean-Marie Lozachmeur, 2011.
"Differential mortality and social security,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 44(1), pages 273-289, February.
- Antoine Bommier, 2006.
"Uncertain Lifetime And Intertemporal Choice: Risk Aversion As A Rationale For Time Discounting,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1223-1246, November.
- Antoine Bommier, 2001. "Uncertain lifetime and intertemporal choice : risk aversion as a rationale for time discounting," Research Unit Working Papers 0108, Laboratoire d'Economie Appliquee, INRA.
- Jeffrey B Liebman, 2002.
"Redistribution in the Current U.S. Social Security System,"
02-09, Center for Economic Studies, U.S. Census Bureau.
- Jeffrey B. Liebman, 2002. "Redistribution in the Current U.S. Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 11-48 National Bureau of Economic Research, Inc.
- Jeffrey B. Liebman, 2001. "Redistribution in the Current U.S. Social Security System," NBER Working Papers 8625, National Bureau of Economic Research, Inc.
- Coronado Julia Lynn & Fullerton Don & Glass Thomas, 2011.
"The Progressivity of Social Security,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 11(1), pages 1-45, November.
- Bommier, Antoine & Magnac, Thierry & Rapoport, Hillel & Roger, Muriel, 2003.
"Droits à la retraite et mortalité différentielle,"
IDEI Working Papers
181, Institut d'Économie Industrielle (IDEI), Toulouse, revised May 2004.
- Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, October.
- Kevin M. Murphy & Robert H. Topel, 2006.
"The Value of Health and Longevity,"
Journal of Political Economy,
University of Chicago Press, vol. 114(5), pages 871-904, October.
- Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June.
- Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2003.
"The Quantity and Quality of Life and the Evolution of World Inequality,"
NBER Working Papers
9765, National Bureau of Economic Research, Inc.
- Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2005. "The Quantity and Quality of Life and the Evolution of World Inequality," American Economic Review, American Economic Association, vol. 95(1), pages 277-291, March.
- Antoine Bommier, 2006. "Mortality, Time Preference and Life-Cycle Models," Working Papers hal-00441888, HAL.
- Eytan Sheshinski, 2007. "The Economic Theory of Annuities," Economics Books, Princeton University Press, edition 1, volume 1, number 8536.
- EECKHOUDT, Louis & PESTIEAU, Pierre, 2007. "Fear of ruin and longevity enhancing investment," CORE Discussion Papers 2007032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.