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On the fiscal treatment of life expectancy related choices

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  • DAVILA, Julio

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

  • LEROUX, Marie-Louise

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

Abstract

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 first 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 first-best into a competitive equilibrium and show that they are specific to the form, whether utility or resources, that the effort takes.

Suggested Citation

  • DAVILA, Julio & LEROUX, Marie-Louise, 2009. "On the fiscal treatment of life expectancy related choices," LIDAM Discussion Papers CORE 2009060, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2009060
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    References listed on IDEAS

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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. de la Croix, David & Ponthiere, Gregory, 2010. "On the Golden Rule of capital accumulation under endogenous longevity," Mathematical Social Sciences, Elsevier, vol. 59(2), pages 227-238, March.
    3. Marie-Louise Leroux & Pierre Pestieau & Gregory Ponthiere, 2011. "Optimal linear taxation under endogenous longevity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(1), pages 213-237, January.
    4. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," Working Papers halshs-00586236, HAL.
    5. Julio Davila, 2008. "The taxation of capital returns in overlapping generations economies without financial assets," Documents de travail du Centre d'Economie de la Sorbonne b08099, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    6. Pierre-André Jouvet & Pierre Pestieau & Gregory Ponthiere, 2010. "Longevity and environmental quality in an OLG model," Journal of Economics, Springer, vol. 100(3), pages 191-216, July.
    7. Kaplan, G.A. & Seeman, T.E. & Cohen, R.D. & Knudsen, L.P. & Guralnik, J., 1987. "Mortality among the elderly in the Alameda County study: Behavioral and demographic risk factors," American Journal of Public Health, American Public Health Association, vol. 77(3), pages 307-312.
    8. LEROUX, Marie-Louise, 2008. "Endogenous differential mortality, non monitored effort and optimal non linear taxation," LIDAM Discussion Papers CORE 2008029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    life expectancy; health expenditures; taxation;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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