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Should we subsidize longevity?

Author

Listed:
  • Marie-Louise Leroux

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

  • Pierre Pestieau

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CREPP - Center of Research in Public Economics and Population Economics - Université de Liège, CEPR - Center for Economic Policy Research - CEPR, PSE - Paris School of Economics, PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Grégory Ponthière

    (PSE - Paris School of Economics, PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper studies the design of the optimal non linear taxation in an economy where longevity varies across agents, and depends on three factors: longevity genes, health investment and farsightedness. Provided earnings, farsightedness and genes are correlated, governmental intervention can be justi.ed on two grounds: correction for a lack of farsightedness and redistribution across both earnings and genetic dimensions. Whether longevity-enhancing spending should be subsidized or taxed is shown to depend on the combined effects of myopia, self-selection and free-riding on the annuity returns. Our policy conclusions depend also on how productivity and genes are correlated, on the complementarity of genes and efforts in the survival function, and on how the government weights the welfare of heterogeneous agents. All in all, it might be desirable to tax longevity-enhancing spending.

Suggested Citation

  • Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," PSE Working Papers halshs-00586236, HAL.
    • Handle: RePEc:hal:psewpa:halshs-00586236
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00586236
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    References listed on IDEAS

    as
    1. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2005. "The Quantity and Quality of Life and the Evolution of World Inequality," American Economic Review, American Economic Association, vol. 95(1), pages 277-291, March.
    2. LEROUX, Marie-Louise & PONTHIERE, Grégory, 2008. "Optimal tax policy and expected longevity: a mean and variance approach," CORE Discussion Papers 2008039, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    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. Broome, John, 2006. "Weighing Lives," OUP Catalogue, Oxford University Press, number 9780199297702.
    9. 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.
    10. Kevin M. Murphy & Robert H. Topel, 2006. "The Value of Health and Longevity," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 871-904, October.
    11. EECKHOUDT, Louis & PESTIEAU, Pierre, 2007. "Fear of ruin and longevity enhancing investment," CORE Discussion Papers 2007032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. 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).
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    Citations

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    Cited by:

    1. Grégory Ponthière, 2008. "Unequal longevities and lifestyles transmission," Working Papers halshs-00586010, HAL.
    2. Leroux, Marie-Louise & Ponthiere, Gregory, 2013. "Utilitarianism and unequal longevities: A remedy?," Economic Modelling, Elsevier, vol. 30(C), pages 888-899.
    3. Grégory Ponthière & Marie-Louise Leroux, 2009. "Utilitarianism and unequal longevities: A remedy?," Working Papers halshs-00566858, HAL.
    4. LEROUX, Marie - Louise & PONTHIERE, Grégory, 2009. "Wives, husbands and wheelchairs : Optimal tax policy under gender-specific health," CORE Discussion Papers 2009071, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Marie-Louise Leroux & Grégory Ponthière, 2009. "Wives, husbands and wheelchairs: Optimal tax policy under gender-specific health," Working Papers halshs-00575059, HAL.
    6. Julio Davila & Marie-Louise Leroux, 2009. "On the fiscal treatment of life expectancy related choices," Post-Print halshs-00423933, HAL.

    More about this item

    Keywords

    optimal taxation; longevity; genetic background; heterogeneity; myopia; taxation optimale; longévité; bagage génétique; hétérogénéité; myopie;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I10 - Health, Education, and Welfare - - Health - - - General

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