Optimal linear taxation under endogenous longevity
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.
|Date of creation:||Sep 2008|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00586241|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2010.
"Collective Annuities and Redistribution,"
- 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.
- PESTIEAU, Pierre & PONTHIERE, Grégory & SATO, Motohiro, . "Longevity, health spending, and pay-as-you-go pensions," CORE Discussion Papers RP 2029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Pierre Pestieau & Grégory Ponthière & Motohiro Sato, 2008. "Longevity, health spending, and pay-as-you-go pensions," Post-Print halshs-00754319, HAL.
- Helmuth Cremer & Philippe De Donder & Darío Maldonado & Pierre Pestieau, 2008.
"Taxing Sin Goods and Subsidizing Health Care,"
CESifo Working Paper Series
2297, CESifo Group Munich.
- CREMER, Helmuth & DE DONDER, Philippe & MALDONADO, Dario & PESTIEAU, Pierre, 2008. "Taxing sin goods and subsidizing health care," CORE Discussion Papers 2008031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & De Donder, Philippe & Maldonado, Darío & Pestieau, Pierre, 2008. "Taxing Sin Goods and Subsidizing Health Care," CEPR Discussion Papers 6777, C.E.P.R. Discussion Papers.
- Broome, John, 2006.
Oxford University Press, number 9780199297702, June.
- 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.
- 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.
- Torben Andersen & Joydeep Bhattacharya, 2011.
"On myopia as rationale for social security,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 135-158, May.
- Torben Andersen & Joydeep Bhattacharya, 2008. "On Myopia as Rationale for Social Security," CESifo Working Paper Series 2401, CESifo Group Munich.
- Anderson, Torben M. & Bhattacharya, Joydeep, 2008. "On Myopia As Rationale for Social Security," Staff General Research Papers 12985, Iowa State University, Department of Economics.
- 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).
When requesting a correction, please mention this item's handle: RePEc:hal:psewpa:halshs-00586241. 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: (CCSD)
If references are entirely missing, you can add them using this form.