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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505565

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  1. Shankha Chakraborty & Mausumi Das, 2003. "Mortality, Human Capital and Persistent Inequality," Working papers 119, Centre for Development Economics, Delhi School of Economics.
  2. David de la Croix & Omar Licandro, 2009. "“The Child is Father of the Man:” Implications for the Demographic Transition," Working Papers 376, Barcelona Graduate School of Economics.
  3. 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.
  4. Kevin M. Murphy & Robert H. Topel, 2005. "The Value of Health and Longevity," NBER Working Papers 11405, National Bureau of Economic Research, Inc.
  5. repec:cup:cbooks:9780521017039 is not listed on IDEAS
  6. 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.
  7. BOUCEKKINE, Raouf & DIENE, Bity & AZOMAHOU, Théophile, . "Growth economics of epidemics: A review of the theory," CORE Discussion Papers RP -2004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Jones Charles I., 2001. "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(2), pages 1-45, August.
  9. Robert E Hall & Charles I Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 39-72, 02.
  10. repec:cup:cbooks:9780521001151 is not listed on IDEAS
  11. Robert Tamura, 2004. "Human capital and economic development," Working Paper 2004-34, Federal Reserve Bank of Atlanta.
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