IDEAS home Printed from https://ideas.repec.org/p/cor/louvrp/2268.html
   My bibliography  Save this paper

Optimal linear taxation under endogenous longevity

Author

Listed:
  • LEROUX, Marie-Louise
  • PESTIEAU, Pierre
  • PONTHIERE, Grégory

Abstract

This paper studies the optimal linear tax-transfer policy in an economy where agents differ in productivity and in genetic background, and where longevity depends on health spending and genes. It is shown that, if agents internalize imperfectly the impact of genes and health spending on longevity, the utilitarian social optimum can be decentralized with type-specific redistributive lump sum transfers and Pigouvian taxes correcting for agents' myopia (leading to undersaving and underinvestment in health), and for their incapacity to perceive the effect of health spending on the resource constraint of the economy (causing overinvestment in health). The second-best problem is also examined under linear taxation instruments. Our main result is that it may be optimal to tax health spending, in particular under a complementarity of genes and health spending in the production of longevity.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • LEROUX, Marie-Louise & PESTIEAU, Pierre & PONTHIERE, Grégory, 2011. "Optimal linear taxation under endogenous longevity," LIDAM Reprints CORE 2268, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:2268
    DOI: 10.1007/s00148-010-0304-1
    Note: In : Journal of Population Economics, 24(1), 213-237, 2011
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1007/s00148-010-0304-1
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Helmuth Cremer & Jean‐Marie Lozachmeur & Pierre Pestieau, 2010. "Collective Annuities and Redistribution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 23-41, February.
    2. 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.
    3. 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.
    4. Gregory Ponthiere, 2010. "Unequal Longevities and Lifestyles Transmission," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 93-126, February.
    5. EECKHOUDT, Louis & PESTIEAU, Pierre, 2007. "Fear of ruin and longevity enhancing investment," LIDAM Discussion Papers CORE 2007032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Helmuth Cremer & Philippe De Donder & Darío Maldonado & Pierre Pestieau, 2012. "Taxing Sin Goods and Subsidizing Health Care," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 101-123, March.
    7. Torben Andersen & Joydeep Bhattacharya, 2011. "On myopia as rationale for social security," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 135-158, May.
    8. Pierre Pestieau & Gregory Ponthiere & Motohiro Sato, 2008. "Longevity, Health Spending, and Pay-as-you-Go Pensions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(1), pages 1-18, March.
    9. Jie Zhang & Junsen Zhang & Michael Leung, 2006. "Health investment, saving, and public policy," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 68-93, February.
    10. Broome, John, 2006. "Weighing Lives," OUP Catalogue, Oxford University Press, number 9780199297702.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," Working Papers halshs-00586236, HAL.
    2. 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.
    3. Dávila, Julio & Leroux, Marie-Louise, 2015. "Efficiency in overlapping generations economies with longevity choices and fair annuities," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 363-383.
    4. Pierre Pestieau & Gregory Ponthiere, 2014. "Policy Implications of Changing Longevity," CESifo Economic Studies, CESifo, vol. 60(1), pages 178-212.
    5. FLEURBAEY, Marc & LEROUX, Marie - Louise & PONTHIERE, Gregory, 2010. "Compensating the dead? Yes we can!," LIDAM Discussion Papers CORE 2010066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Pierre PESTIEAU & Gregory PONTHIERE, 2016. "Longevity Variations and the Welfare State," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 82(2), pages 207-239, June.
    7. Chu-chuan Cheng & Hsun Chu, 2018. "Optimal policies for sin goods and health care: Tax or subsidy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(2), pages 412-429, April.
    8. Fleurbaey, Marc & Leroux, Marie-Louise & Ponthiere, Gregory, 2014. "Compensating the dead," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 28-41.
    9. Carlotta Balestra & Davide Dottori, 2012. "Aging society, health and the environment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 1045-1076, July.
    10. Leroux, Marie-Louise & Ponthiere, Gregory, 2013. "Utilitarianism and unequal longevities: A remedy?," Economic Modelling, Elsevier, vol. 30(C), pages 888-899.
    11. Stelter, Robert, 2014. "Over-aging: Are present human populations too old?," Thuenen-Series of Applied Economic Theory 137, University of Rostock, Institute of Economics.
    12. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 41-74, March.
    13. Julio Davila & Marie-Louise Leroux, 2009. "On the fiscal treatment of life expectancy related choices," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00423933, HAL.
    14. Pierre Pestieau & Gregory Ponthiere, 2014. "Policy Implications of Changing Longevity," CESifo Economic Studies, CESifo, vol. 60(1), pages 178-212.
    15. Torben M. Andersen & Marias H. Gestsson, 2010. "Longevity, Growth and Intergenerational Equity - The Deterministic Case," Economics wp52, Department of Economics, Central bank of Iceland.
    16. Stelter, Robert, 2016. "Over-aging — Are present-day human populations too old?," Mathematical Social Sciences, Elsevier, vol. 82(C), pages 116-143.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 41-74, March.
    2. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," Working Papers halshs-00586236, HAL.
    3. Leroux, M.-L. & Pestieau, P. & Ponthiere, G., 2011. "Longevity, genes and efforts: An optimal taxation approach to prevention," Journal of Health Economics, Elsevier, vol. 30(1), pages 62-76, January.
    4. Pierre Pestieau & Gregory Ponthiere, 2014. "Policy Implications of Changing Longevity," CESifo Economic Studies, CESifo, vol. 60(1), pages 178-212.
    5. Gregory Ponthiere, 2010. "Unequal Longevities and Lifestyles Transmission," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 93-126, February.
    6. Marie-Louise Leroux, 2011. "Endogenous differential mortality, non-contractible effort and non-linear taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(1), pages 56-73, February.
    7. 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.
    8. Pierre Pestieau & Gregory Ponthiere, 2012. "Myopia, regrets, and risky behaviors," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(2), pages 288-317, April.
    9. Pierre PESTIEAU & Gregory PONTHIERE, 2016. "Longevity Variations and the Welfare State," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 82(2), pages 207-239, June.
    10. 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.
    11. Chu-chuan Cheng & Hsun Chu, 2018. "Optimal policies for sin goods and health care: Tax or subsidy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(2), pages 412-429, April.
    12. Dávila, Julio & Leroux, Marie-Louise, 2015. "Efficiency in overlapping generations economies with longevity choices and fair annuities," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 363-383.
    13. Maik T. Schneider & Ralph Winkler, 2010. "Growth and Welfare under Endogenous Lifetime," Diskussionsschriften dp1013, Universitaet Bern, Departement Volkswirtschaft.
    14. Ponthiere, Gregory, 2011. "Existence and stability of overconsumption equilibria," Economic Modelling, Elsevier, vol. 28(1), pages 74-90.
    15. Leroux, Marie-Louise & Pestieau, Pierre & Ponthière, Grégory, 2015. "Longévité différentielle et redistribution : enjeux théoriques et empiriques," L'Actualité Economique, Société Canadienne de Science Economique, vol. 91(4), pages 465-497, Décembre.
    16. Gregory Ponthiere, 2013. "Fair Accumulation under Risky Lifetime," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(2), pages 210-230, May.
    17. Miller, Stephen M. & Neanidis, Kyriakos C., 2015. "Demographic transition and economic welfare: The role of in-cash and in-kind transfers," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 84-92.
    18. Marie-Louise Leroux & Grégory Ponthière, 2013. "Optimal prevention when coexistence matters," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1095-1127, July.
    19. Hansen, Casper Worm & Lønstrup, Lars, 2009. "The optimal legal retirement age in an OLG model with endogenous labour supply," Discussion Papers of Business and Economics 5/2009, University of Southern Denmark, Department of Business and Economics.
    20. Julio Davila & Marie-Louise Leroux, 2009. "On the fiscal treatment of life expectancy related choices," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00423933, HAL.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cor:louvrp:2268. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS). General contact details of provider: https://edirc.repec.org/data/coreebe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.