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Should we subsidize longevity?

  • Marie-Louise Leroux

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

  • Pierre Pestieau

    (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CREPP - Center of Research in Public Economics and Population Economics - Université de Liège, CEPR - Center for Economic Policy Research - CEPR, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

  • Grégory Ponthière

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

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.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00586236.

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Date of creation: Sep 2008
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Handle: RePEc:hal:psewpa:halshs-00586236
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586236
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  1. LEROUX, Marie-Louise & PESTIEAU, Pierre & PONTHIERE, Grégory, . "Optimal linear taxation under endogenous longevity," CORE Discussion Papers RP -2268, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  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. Marie-Louise Leroux & Grégory Ponthière, 2008. "Optimal tax policy and expected longevity: A mean and variance utility approach," PSE Working Papers halshs-00586247, HAL.
  4. 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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