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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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Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 60 (2013)
Issue (Month): 2 (05)
Pages: 210-230

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Handle: RePEc:bla:scotjp:v:60:y:2013:i:2:p:210-230
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  1. S. Balia & AM. Jones, 2004. "Mortality, Lifestyle and Socio-Economic Status," Working Paper CRENoS 200416, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
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  18. repec:hal:wpaper:halshs-00564934 is not listed on IDEAS
  19. 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.
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