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Fair Accumulation under Risky Lifetime

Author

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  • Grégory Ponthière

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Individuals save for their old days, but not all of them enjoy the old age. This paper characterizes the optimal capital accumulation in a two-period OLG model where lifetime is risky and varies across individuals. We compare two long-run social optima: (1) the average utilitarian optimum, where steady-state average welfare is maximized; (2) the egalitarian optimum, where the welfare of the worst-o¤ at the steady-state is maximized. It is shown that, under plausible conditions, the egalitarian optimum involves a higher capital and a lower fertility than the utilitarian optimum. Those inequalities hold also in a second-best framework where survival conditions are exogenously linked to the capital level.

Suggested Citation

  • Grégory Ponthière, 2012. "Fair Accumulation under Risky Lifetime," PSE Working Papers halshs-00746913, HAL.
    • Handle: RePEc:hal:psewpa:halshs-00746913
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00746913
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    1. Fleurbaey, Marc & Leroux, Marie-Louise & Ponthiere, Gregory, 2014. "Compensating the dead," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 28-41.

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    Keywords

    Egalitarianism; Differentiated Mortality; Optimal Capital Accumulation ; Golden Rule ; Fertility;
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