Fair Accumulation under Risky Lifetime

Abstract : Individuals save for their old days, but not all of them enjoy the old age. This paper characterizes the optimal capital accumulation in a two-period OLG model where lifetime is risky and varies across individuals. We compare two long-run social optima: (1) the average utilitarian optimum, where steady-state average welfare is maximized; (2) the egalitarian optimum, where the welfare of the worst-off at the steady-state is maximized. It is shown that, under plausible conditions, the egalitarian optimum involves a higher capital and a lower fertility than the utilitarian optimum. Those inequalities hold also in a second-best framework where survival conditions are exogenously linked to the capital level.
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Submitted on : Monday, April 15, 2013 - 11:54:42 AM
Last modification on : Tuesday, April 24, 2018 - 5:20:14 PM

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Grégory Ponthière. Fair Accumulation under Risky Lifetime. Scottish Journal of Political Economy, Wiley, 2013, 60 (2), pp.210-230. ⟨10.1111/sjpe.12008⟩. ⟨hal-00813231⟩

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