On the Golden Rule of capital accumulation under endogenous longevity
Journal article: 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.
Author(s)
David de La Croix, Grégory Ponthière
Journal
- Mathematical Social Sciences
Date of publication
- 2010
Keywords JEL
Keywords
- Golden Rule
- Health
- Longevity
- OLG models
Pages
- 227-238
URL of the HAL notice
Version
- 1
Volume
- 59