On the Golden Rule of capital accumulation under endogenous longevity
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.
Year of publication: |
2010
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Authors: | de la Croix, David ; Ponthiere, Gregory |
Published in: |
Mathematical Social Sciences. - Elsevier, ISSN 0165-4896. - Vol. 59.2010, 2, p. 227-238
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Publisher: |
Elsevier |
Keywords: | Golden Rule Health Longevity OLG models |
Saved in:
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