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Optimal Public Policy with Endogenous Mortality

Author

Listed:
  • Rangan Gupta

    () (Department of Economics, University of Pretoria)

  • Emmanuel Ziramba

    () (Department of Economics, University of South Africa)

Abstract

Using a monetary pure-exchange overlapping generations model, where the probability of survival of the young agents depends upon share of government expenditure on health, education and infrastructure, we analyze the welfare-maximizing policy mix between explicit and implicit taxation. We show that increases in the survival probability lead to an increase in the reliance on seigniorage as a welfare maximizing outcome. However, for our results to hold, the seigniorage tax base must be large enough for the benevolent planner to use the inflation tax.

Suggested Citation

  • Rangan Gupta & Emmanuel Ziramba, 2008. "Optimal Public Policy with Endogenous Mortality," Working Papers 200829, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:200829
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    Keywords

    Monetary Pure Exchange Overlapping Generations Model; Probability of Survival; Welfare Maximizing Policy Mix;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I1 - Health, Education, and Welfare - - Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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