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Optimal Linear Taxation under Endogenous Longevity

Author

Listed:
  • Marie-Louise Leroux

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

  • Pierre Pestieau

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, 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, CREPP - Center of Research in Public Economics and Population Economics - Université de Liège, 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)

  • 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

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. If agents internalize imperfectly the impact of health spending on longevity, the utilitarian optimum can be decentralized with type-specific lump-sum transfers and Pigouvian taxes correcting for agents' myopia and for their misperception of health spending's effects on the economy's resources. The second-best problem is examined under linear taxation instruments. It may be optimal to tax health spending, especially under complementarity of genes and health spending in the production of longevity.

Suggested Citation

  • Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2011. "Optimal Linear Taxation under Endogenous Longevity," PSE-Ecole d'économie de Paris (Postprint) halshs-00754569, HAL.
    • Handle: RePEc:hal:pseptp:halshs-00754569
    DOI: 10.1007/s00148-010-0304-1
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    References listed on IDEAS

    as
    1. 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.
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    3. Gregory Ponthiere, 2010. "Unequal Longevities and Lifestyles Transmission," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 93-126, February.
    4. 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.
    5. Torben Andersen & Joydeep Bhattacharya, 2011. "On myopia as rationale for social security," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 135-158, May.
    6. Broome, John, 2006. "Weighing Lives," OUP Catalogue, Oxford University Press, number 9780199297702.
    7. 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.
    8. Jie Zhang & Junsen Zhang & Michael C.M. Leung, 2006. "Health investment, saving, and public policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(1), pages 68-93, February.
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    10. EECKHOUDT, Louis & PESTIEAU, Pierre, 2007. "Fear of ruin and longevity enhancing investment," LIDAM Discussion Papers CORE 2007032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," Working Papers halshs-00586236, HAL.
    2. Leroux, Marie-Louise & Ponthiere, Gregory, 2013. "Utilitarianism and unequal longevities: A remedy?," Economic Modelling, Elsevier, vol. 30(C), pages 888-899.
    3. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 41-74, March.
    4. Pierre Pestieau & Gregory Ponthiere, 2014. "Policy Implications of Changing Longevity," CESifo Economic Studies, CESifo Group, vol. 60(1), pages 178-212.
    5. 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.
    6. Dávila, Julio & Leroux, Marie-Louise, 2015. "Efficiency in overlapping generations economies with longevity choices and fair annuities," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 363-383.
    7. FLEURBAEY, Marc & LEROUX, Marie - Louise & PONTHIERE, Gregory, 2010. "Compensating the dead? Yes we can!," LIDAM Discussion Papers CORE 2010066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Julio Davila & Marie-Louise Leroux, 2009. "On the fiscal treatment of life expectancy related choices," Post-Print halshs-00423933, HAL.
    9. Pestieau, Pierre & Ponthiere, Gregory, 2016. "Longevity Variations And The Welfare State," Journal of Demographic Economics, Cambridge University Press, vol. 82(2), pages 207-239, June.
    10. Chu-chuan Cheng & Hsun Chu, 2018. "Optimal policies for sin goods and health care: Tax or subsidy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(2), pages 412-429, April.
    11. Fleurbaey, Marc & Leroux, Marie-Louise & Ponthiere, Gregory, 2014. "Compensating the dead," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 28-41.
    12. Carlotta Balestra & Davide Dottori, 2012. "Aging society, health and the environment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 1045-1076, July.
    13. Stelter, Robert, 2014. "Over-aging - Are present human populations too old?," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100334, Verein für Socialpolitik / German Economic Association.
    14. Torben M. Andersen & Marias H. Gestsson, 2010. "Longevity, Growth and Intergenerational Equity - The Deterministic Case," Economics wp52, Department of Economics, Central bank of Iceland.
    15. Marie-Louise Leroux, 2024. "Politiques publiques de financement de la procréation assistée," CIRANO Project Reports 2024rp-23, CIRANO.
    16. Stelter, Robert, 2016. "Over-aging — Are present-day human populations too old?," Mathematical Social Sciences, Elsevier, vol. 82(C), pages 116-143.

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    More about this item

    Keywords

    Longevity; Myopia; Taxation;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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