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Fair Accumulation under Risky Lifetime

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  • Grégory Ponthière

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

Individuals save for their old days, but not all of them enjoy the old age. This paper characterizes the optimal capital accumulation in a two-period OLG model where lifetime is risky and varies across individuals. We compare two long-run social optima: (1) the average utilitarian optimum, where steady-state average welfare is maximized; (2) the egalitarian optimum, where the welfare of the worst-o¤ at the steady-state is maximized. It is shown that, under plausible conditions, the egalitarian optimum involves a higher capital and a lower fertility than the utilitarian optimum. Those inequalities hold also in a second-best framework where survival conditions are exogenously linked to the capital level.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00746913.

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Date of creation: Oct 2012
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Handle: RePEc:hal:psewpa:halshs-00746913

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Keywords: Egalitarianism ; Differentiated Mortality ; Optimal Capital Accumulation ; Golden Rule ; Fertility;

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  1. de la Croix, David & Ponthiere, Gregory, 2010. "On the Golden Rule of capital accumulation under endogenous longevity," Mathematical Social Sciences, Elsevier, vol. 59(2), pages 227-238, March.
  2. Blackburn, Keith & Cipriani, Giam Pietro, 2002. "A model of longevity, fertility and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 187-204, February.
  3. Oded_Galor & Omer Moav, 2004. "Natural Selection and the Evolution of Life Expectancy," Working Papers 2004-14, Brown University, Department of Economics.
  4. David De La Croix & Pierre Pestieau & Grégory Ponthière, 2009. "How Powerful is Demography? The Serendipity Theorem Revisited," PSE Working Papers halshs-00575095, HAL.
  5. FLEURBAEY, Marc & LEROUX, Marie - Louise & PONTHIERE, Gregory, 2010. "Compensating the dead? Yes we can!," CORE Discussion Papers 2010066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  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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  17. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2003. "The Quantity and Quality of Life and the Evolution of World Inequality," NBER Working Papers 9765, National Bureau of Economic Research, Inc.
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  19. Samuelson, Paul A, 1975. "The Optimum Growth Rate for Population," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 531-38, October.
  20. Hammond, Peter J, 1981. "Ex-ante and Ex-post Welfare Optimality under Uncertainty," Economica, London School of Economics and Political Science, vol. 48(191), pages 235-50, August.
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