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On the Golden Rule of capital accumulation under endogenous longevity

David de la Croix and Gregory Ponthiere

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: Health spending obviously increase with capital per worker. This paper derives the optimal accumulation policy in such a context. The optimal accumulation rule depends on whether health spending improve consumption enjoyment, and on whether the planner adheres to an instantaneous welfarist view or to a complete life view. First, when the only role of health is to enhance longevity, we show that the capital per worker maximizing steady-state consumption per head is inferior to the standard Golden Rule. Moreover, the capital per worker maximizing steady-state consumption per head, when consumption efficiency depends on the health status, tends to exceed the optimal capital level under purely longevity-enhancing spending. Finally, when the planner adheres to a complete life view, the capital per worker maximizing steady-state expected lifetime consumption per head exceeds the optimal capital per worker under the instantaneous view.

Keywords: Golden Rule; Health; Longevity; OLG models (search for similar items in EconPapers)
Date: 2010-03
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Citations: View citations in EconPapers (25)

Published in Mathematical Social Sciences, 2010, 59 (2), pp.227-238. ⟨10.1016/j.mathsocsci.2009.07.007⟩

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Journal Article: On the Golden Rule of capital accumulation under endogenous longevity (2010) Downloads
Working Paper: On the Golden Rule of capital accumulation under endogenous longevity (2010)
Working Paper: On the Golden Rule of capital accumulation under endogenous longevity (2008) Downloads
Working Paper: On the Golden Rule of capital accumulation under endogenous longevity (2008) Downloads
Working Paper: On the Golden Rule of capital accumulation under endogenous longevity (2008) Downloads
Working Paper: On the Golden Rule of capital accumulation under endogenous longevity (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00754468

DOI: 10.1016/j.mathsocsci.2009.07.007

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