On the Golden Rule of capital accumulation under endogenous longevity

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.
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Submitted on : Tuesday, November 20, 2012 - 9:42:18 AM
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David de la Croix, Grégory Ponthière. On the Golden Rule of capital accumulation under endogenous longevity. Mathematical Social Sciences, Elsevier, 2010, 59 (2), pp.227-238. ⟨10.1016/j.mathsocsci.2009.07.007⟩. ⟨halshs-00754468⟩

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