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On the fiscal treatment of life expectancy related choices

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  • Julio Davila

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain)

  • Marie-Louise Leroux

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain)

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 indentify 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

  • 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.
  • Handle: RePEc:hal:cesptp:halshs-00423933
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00423933
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    Keywords

    taxation; Life expectancy; health expenditures; taxation.; Espérance de vie; dépenses de santé; imposition.;

    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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