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Should we subsidize longevity?

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Author Info
LEROUX, Marie-Louise (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
PESTIEAU, Pierre (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
PONTHIéRE, GrŽgory

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Abstract

This paper studies the design of the optimal non linear taxation in an economy where longevity varies across agents, and depends on three factors: longevity genes, health investment and farsightedness. Provided earnings, farsightedness and genes are correlated, governmental intervention can be justified on two grounds: correction for a lack of farsightedness and redistribution across both earnings and genetic dimensions. Whether longevity-enhancing spending should be subsidized or taxed is shown to depend on the combined effects of myopia, self-selection and free-riding on the annuity returns. Our policy conclusions depend also on how productivity and genes are correlated, on the complementarity of genes and efforts in the survival function, and on how the government weights the welfare of heterogeneous agents. All in all, it might be desirable to tax longevity-enhancing spending.

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Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2008058.

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Date of creation: 01 Oct 2008
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Handle: RePEc:cor:louvco:2008058

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Related research
Keywords: optimal taxation; longevity; genetic background; heterogeneity; myopia.;

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Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
I10 - Health, Education, and Welfare - - Health - - - General

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References listed on IDEAS
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.:
  1. Pierre-André Jouvet & Pierre Pestieau & Grégory Ponthière, 2007. "Longevity and environmental quality in an OLG model," EconomiX Working Papers 2007-19, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
    Other versions:
  2. LEROUX, Marie-Louise & PONTHIERE, GrŽgory, 2008. "Optimal tax policy and expected longevity: a mean and variance approach," CORE Discussion Papers 2008039, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  3. 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. [Downloadable!]
    Other versions:
  4. 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. [Downloadable!] (restricted)
    Other versions:
  5. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Optimal linear taxation under endogenous longevity," PSE Working Papers 2008-49, PSE (Ecole normale supérieure). [Downloadable!]
    Other versions:
  6. Jie Zhang & Junsen Zhang & Michael Leung, 2006. "Health investment, saving, and public policy," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 68-93, February. [Downloadable!] (restricted)
  7. LEROUX, Marie-Louise, 2008. "Endogenous differential mortality, non monitored effort and optimal non linear taxation," CORE Discussion Papers 2008029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  8. 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). [Downloadable!]
Full references

Cited by:
(explanations, 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.)

  1. Marie-Louise Leroux & Grégory Ponthière, 2009. "Utilitarianism and unequal longevities: A remedy?," PSE Working Papers 2009-19, PSE (Ecole normale supérieure). [Downloadable!]
  2. Grégory Ponthière, 2008. "Unequal longevities and lifestyles transmission," PSE Working Papers 2008-68, PSE (Ecole normale supérieure). [Downloadable!]
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