On the fiscal treatment of life expectancy related choices
In an overlapping generations economy setup we show that, if individuals can improve their life expectancy by exerting some effort, costly in terms of either resources or utility, the competitive equilibrium steady state differs from the ï¬rst best steady state. This is due to the fact that under perfect competition individuals fail to anticipate the impact of their longevity-enhancing effort on the return of their annuitized savings. We identify the policy instruments required to implement the ï¬rst-best into a competitive equilibrium and show that they are speciï¬c to the form, whether utility or resources, that the effort takes.
|Date of creation:||01 Sep 2009|
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