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On the Golden Rule of capital accumulation under endogenous longevity

  • de la Croix, David
  • Ponthiere, Gregory

Health spending obviously increase with capital per worker. This paper derives the optimal accumulation policy in such a context. The optimal accumulation rule depends on whether health spending improve consumption enjoyment, and on whether the planner adheres to an instantaneous welfarist view or to a complete life view. First, when the only role of health is to enhance longevity, we show that the capital per worker maximizing steady-state consumption per head is inferior to the standard Golden Rule. Moreover, the capital per worker maximizing steady-state consumption per head, when consumption efficiency depends on the health status, tends to exceed the optimal capital level under purely longevity-enhancing spending. Finally, when the planner adheres to a complete life view, the capital per worker maximizing steady-state expected lifetime consumption per head exceeds the optimal capital per worker under the instantaneous view.

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Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 59 (2010)
Issue (Month): 2 (March)
Pages: 227-238

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Handle: RePEc:eee:matsoc:v:59:y:2010:i:2:p:227-238
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  1. Cervellati, Matteo & Sunde, Uwe, 2005. "Human capital formation, life expectancy, and the process of development," Munich Reprints in Economics 20083, University of Munich, Department of Economics.
  2. Omar Licandro & David de la Croix, 2009. "The Child is Father of the Man: Implications for the Demographic Transition," UFAE and IAE Working Papers 765.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Kevin M. Murphy & Robert H. Topel, 2005. "The Value of Health and Longevity," NBER Working Papers 11405, National Bureau of Economic Research, Inc.
  4. Charles I. Jones, . "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," Working Papers 99008, Stanford University, Department of Economics.
  5. Robert E. Hall & Charles I. Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 39-72.
  6. 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.
  7. Mausumi Das & Shankha Chakraborty, 2010. "Mortality, Human Capital and Persistent Inequality," Working Papers id:2365, eSocialSciences.
  8. Tamura, Robert, 2006. "Human capital and economic development," Journal of Development Economics, Elsevier, vol. 79(1), pages 26-72, February.
  9. Raouf Boucekkine & Bity Diene & Theophile Azomahou, 2008. "Growth Economics of Epidemics: A Review of the Theory," Mathematical Population Studies, Taylor & Francis Journals, vol. 15(1), pages 1-26.
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