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Endogenous differential mortality, non monitored effort and optimal non linear taxation

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  • LEROUX, Marie-Louise

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Abstract

This paper studies the normative problem of redistribution among individuals who can influence their longevity through a non-monetary effort but have different taste for effort. As benchmarks, we first present the laissez-faire and the first best. In the first best, the level of effort is always lower than in the laissez-faire as the social planner takes into account the consequences of higher survival on the budget constraint. However, since we suppose that effort is private and non-monetary (like exercising), it is reasonable to think that the social planner has no control over it. Thus, we modify our framework and assume for the rest of the paper that effort is determined by the individual while the social planner only allocates consumptions. Under full information with non monitored effort, early consumption is preferred to future consumption and the high-survival individual obtains higher future consumption. Under asymmetric information, the distortion is identical for the low-survival individual while the direction of the distortion for the high-survival individual is ambiguous. We finally show how to decentralize these allocations through a perfect annuity market and (positive or negative) taxes on annuities.

Suggested Citation

  • LEROUX, Marie-Louise, 2008. "Endogenous differential mortality, non monitored effort and optimal non linear taxation," CORE Discussion Papers 2008029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2008029
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    File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2008_29.pdf
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    Cited by:

    1. LEROUX, Marie-Louise & PESTIEAU, Pierre & PONTHIÈRE, Grégory, 2008. "Should we subsidize longevity?," CORE Discussion Papers 2008058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Marie-Louise Leroux & Gregory Ponthiere, 2009. "Optimal tax policy and expected longevity: a mean and variance utility approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(4), pages 514-537, August.
    3. Marie-Louise Leroux & Grégory Ponthière, 2008. "Optimal tax policy and expected longevity: A mean and variance utility approach," Working Papers halshs-00586247, HAL.
    4. repec:hal:journl:halshs-00423933 is not listed on IDEAS
    5. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," Working Papers halshs-00586236, HAL.

    More about this item

    Keywords

    annuities; effort; differential mortality; non linear taxation.;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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