Endogenous differential mortality, non-contractible effort and non-linear taxation

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper studies a problem of non linear taxation when individuals have different longevities resulting from a non-monetary effort (like exercising). We first present the laissezfaire and the first best. Like Becker and Philipson (1998), we find that the laissez-faire level of effort is too high compared with the first best, because individuals do not internalize the impact of survival on the return of their savings. We also claim that because of its nonmonetary form, effort is not contractible. That is why we modify our framework and assume, for the rest of the paper, that effort is determined by the individual while the social planner only allocates consumptions. It turns out that, under full information, a tax on the return of annuitized savings is desirable for both types. This tax is higher for the low-survival individual. Under asymmetric information, the low-survival individual still faces a tax while the high-survival individual might now face a positive or negative tax on annuities. Interestingly, our results depend on the value of life. JEL Code: H21, H23, H55, I12. Terms of use: Documents in

Efficiency in overlapping generations economies with longevity choices and fair annuities

“…Allowing for different types may create moral hazard problems and the intervention of the government may certainly be complicated by the necessity to introduce incentive constraints. Such an extension has been dealt with in Leroux (2011) when agents have different disutility of effort and in Leroux et al (2011), when agents differ in productivity and in their genetic backgrounds. These models are derived in a static equilibrium framework.…”

“…30 The competitive equilibrium steady state condition for effort is in this case p 0 ðẽÞvðc1Þ ¼ c þ p 0 ðẽÞ pðẽÞ v 0 ðc1Þkn: 31 This works instead in a static partial equilibrium framework, as in Leroux (2011), where the best allocation is restored through a tax on savings or, equivalently, on second-period consumption. In this case, the individual has less incentives to invest in a higher life expectancy as his second-period consumption is lower.…”

Longévité différentielle et redistribution : enjeux théoriques et empiriques

“…Comme nous l'avons indiqué dans l'introduction, le mode de vie, tel que le fait de pratiquer une activité sportive, dormir suffisamment, prendre un petit déjeuner, est aussi à l'origine des différences de longévité observées au sein d'une population. Leroux (2011) aborde ce problème et fait l'hypothèse que les différences de mode de vie découlent de différences de préférences individuelles. Les individus s'astreignent à un certain mode de vie en fonction de leur préférences individuelles, ou plus particulièrement en fonction de leur « goût » pour un effort visant à 27.…”

“…De la même manière, pour certains arrêter de fumer représente un effort insurmontable alors que pour d'autres, cela sera plus facile. Leroux (2011) modélise les préférences individuelles lorsque les agents ont des « goûts » pour l'effort différents de la manière suivante :…”

Should We Subsidize Longevity?

“…In the light of that example, the case of complementarity does not seem as strong as it may appear at first sight. 13 Given that the empirical testing of those two assumptions can hardly be made (because of the reason mentioned above regarding the identification of 'longevity genes'), it makes sense to explore the policy consequences of departing from complementarity of ε and e.…”