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Longevity and Pay-as-you-Go pensions

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Author Info

  • PESTIEAU, Pierre
  • PONTHIÈRE, Grégory
  • 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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Bibliographic Info

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: 00 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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References

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  1. Gregory Ponthiere, 2006. "Growth, Longevity and Public Policy," CESifo Working Paper Series 1780, CESifo Group Munich.
  2. 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.
  3. Shankha Chakraborty, 2002. "Endogenous Lifetime and Economic Growth," University of Oregon Economics Department Working Papers 2002-03, University of Oregon Economics Department, revised 26 Jan 2002.
  4. Antoine Bommier, 2006. "Mortality, Time Preference and Life-Cycle Models," Working Papers hal-00441888, HAL.
  5. Helmuth Cremer & Firouz Gahvari & Pierre Pestieau, 2008. "Pensions with heterogenous individuals and endogenous fertility," Journal of Population Economics, Springer, vol. 21(4), pages 961-981, October.
  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.
  7. repec:ebl:ecbull:v:9:y:2004:i:3:p:1-10 is not listed on IDEAS
  8. 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.
  9. Davies, James B. & Kuhn, Peter, 1992. "Social security, longevity, and moral hazard," Journal of Public Economics, Elsevier, vol. 49(1), pages 91-106, October.
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