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Fair Accumulation under Risky Lifetime


  • Gregory Ponthiere


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-off 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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Suggested Citation

  • Gregory Ponthiere, 2013. "Fair Accumulation under Risky Lifetime," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(2), pages 210-230, May.
  • Handle: RePEc:bla:scotjp:v:60:y:2013:i:2:p:210-230 DOI: sjpe.12008

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    References listed on IDEAS

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    1. Fleurbaey, Marc & Leroux, Marie-Louise & Ponthiere, Gregory, 2014. "Compensating the dead," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 28-41.

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