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Longevity, Health Spending, and Pay-as-you-Go Pensions

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Author Info

  • Pierre Pestieau
  • Gregory Ponthiere
  • Motohiro Sato

Abstract

This paper aims at investigating whether or not a utilitarian social planner should subsidize longevity-enhancing expenditures in an economy with a pay-as-you-go pension system. For that purpose, a two-period overlapping-generations model is developed, in which the probability of survival to the second period can be raised by private health spending. Focusing on the steady state, it is shown that the sign of the optimal subsidy on health expenditures tends to be negative when the replacement ratio is sufficiently large. Moreover, the optimal health subsidy is also shown to depend significantly on individual preferences and on the longevity production process.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 64 (2008)
Issue (Month): 1 (March)
Pages: 1-18

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200803)64:1_1:lhsapp_2.0.tx_2-f

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Related research

Keywords: Longevity; health care; PAYG social security;

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References

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  1. 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).
  2. Volker Meier & Robert Fenge, 2004. "Are Family Allowances And Fertility-Related Pensions Siamese Twins?," Royal Economic Society Annual Conference 2004 125, Royal Economic Society.
  3. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 19606, University of Munich, Department of Economics.
  4. Gregory Ponthiere, 2006. "Growth, Longevity and Public Policy," CESifo Working Paper Series 1780, CESifo Group Munich.
  5. Rosa Aísa & Fernando Pueyo, 2004. "Endogenous longevity, health and economic growth: a slow growth for a longer life?," Economics Bulletin, AccessEcon, vol. 9(3), pages 1-10.
  6. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428, October.
  7. 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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