While the utility value of life may decrease monotonically with age, the dollar value may increase dramatically until a fairly old age (by tenfold to age 60 for one plausible set of parameters). Crucial for this result is a positive real rate of interest which makes accumulation desirable, leading to a lower marginal utility of money when one gets older, explaining the divergence. The time constraint on consumption, the utility of wealth ownership, and capital market imperfection accentuate this divergence which raises perplexing questions as to which value of life should be used and whether the old should be taxed and the young subsidized.
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Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number
270.
Length: Date of creation: Date of revision: Handle: RePEc:bon:bonsfa:270
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