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Longevity and Pay-as-you-Go pensions

  • PESTIEAU, Pierre
  • PONTHIÈRE, Grégory
  • SATO, Motohiro

This paper aims at investigating whether or not a utilitarian social planner should subsidize longevity-enhancing expenditures in an economy with a PAYG pension system. For that purpose, a simple two-period OLG model is developed, in which the length of the second period of life can be raised by private health spendings. Focussing on the steady-state, it is shown that the sign of the optimal subsidy on health expenditures tends to be negative when the replacement ratio is sufficiently large. Moreover, the optimal health subsidy is also shown to depend significantly on the longevity production process and on the production technology.

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File URL: http://alfresco.uclouvain.be/alfresco/download/attach/workspace/SpacesStore/75499eb5-e616-49d2-b502-ec0bac89b3e0/coredp_2006_54.pdf
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006054.

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Date of creation: 00 Jun 2006
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Handle: RePEc:cor:louvco:2006054
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  1. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June.
  2. 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.
  3. repec:ebl:ecbull:v:9:y:2004:i:3:p:1-10 is not listed on IDEAS
  4. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2004. "Pensions with Heterogenous Individuals and Endogenous Fertility," IDEI Working Papers 313, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Gregory Ponthiere, 2006. "Growth, Longevity and Public Policy," CESifo Working Paper Series 1780, CESifo Group Munich.
  6. Rosa Aísa & Fernando Pueyo, 2004. "Endogenous longevity, health and economic growth: a slow growth for a longer life?," Economics Bulletin, AccessEcon, vol. 9(3), pages 1-10.
  7. repec:cup:cbooks:9780521001151 is not listed on IDEAS
  8. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  9. Antoine Bommier, 2006. "Mortality, Time Preference and Life-Cycle Models," Working Papers hal-00441888, HAL.
  10. Davies, James B. & Kuhn, Peter, 1992. "Social security, longevity, and moral hazard," Journal of Public Economics, Elsevier, vol. 49(1), pages 91-106, October.
  11. Browning, Martin & Hansen, Lars Peter & Heckman, James J., 1999. "Micro data and general equilibrium models," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 8, pages 543-633 Elsevier.
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