Longevity and Pay-as-you-Go pensions

Pierre Pestieau, Grégory Ponthière and Motohiro Sato

No 2006054, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper aims at investigating whether or not a utilitarian social planner should subsidize longevity-enhancing expenditures in an economy with a PAYG pension system. For that purpose, a simple two-period OLG model is developed, in which the length of the second period of life can be raised by private health spendings. Focussing on the steady-state, it is shown that the sign of the optimal subsidy on health expenditures tends to be negative when the replacement ratio is sufficiently large. Moreover, the optimal health subsidy is also shown to depend significantly on the longevity production process and on the production technology.

Keywords: longevity; health care; PAYG social security (search for similar items in EconPapers)
JEL-codes: E13 E21 (search for similar items in EconPapers)
Date: 2006-06
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2006054

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