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Longevity and Pay-as-you-Go pensions

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Author Info
PESTIEAU, Pierre
PONTHIéRE, GrŽgory
SATO, Motohiro
Abstract

This paper aims at investigating whether or not a utilitarian social planner should subsidize longevity-enhancing expenditures in an economy with a PAYG pension system. For that purpose, a simple two-period OLG model is developed, in which the length of the second period of life can be raised by private health spendings. Focussing 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 the longevity production process and on the production technology.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006054.

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Date of creation: 01 Jun 2006
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Handle: RePEc:cor:louvco:2006054

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Related research
Keywords: longevity; health care; PAYG social security;

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Find related papers by JEL classification:
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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  1. Gregory Ponthiere, 2006. "Growth, Longevity and Public Policy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. 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. [Downloadable!]
  3. Martin Browning & Lars Peter Hansen & James J. Heckman, 1999. "Micro Data and General Equilibrium Models," Discussion Papers 99-10, University of Copenhagen. Department of Economics.
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  4. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2006. "Pensions with Heterogenous Individuals and Endogenous Fertility," CEPR Discussion Papers 5553, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Davies, James B. & Kuhn, Peter, 1992. "Social security, longevity, and moral hazard," Journal of Public Economics, Elsevier, vol. 49(1), pages 91-106, October. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. Rosa Aísa & Fernando Pueyo, 2004. "Endogenous longevity, health and economic growth: a slow growth for a longer life?," Economics Bulletin, Economics Bulletin, vol. 9(3), pages 1-10. [Downloadable!]
  8. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May. [Downloadable!] (restricted)
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  1. Giam Pietro Cipriani & Miltiadis Makris, 2009. "PAYG Pensions and Human Capital Accumulation: Some Unpleasant Arithmetic," CHILD Working Papers wp19_09, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY. [Downloadable!]
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