Optimal linear taxation under endogenous longevity |
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Authors: | Marie-Louise Leroux Pierre Pestieau Gregory Ponthiere |
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Institution: | (1) CORE, Universit? Catholique de Louvain, Voie du Roman Pays, 34, 1348 Louvain-la-Neuve, Belgium;(2) CREPP, CORE, PSE and CEPR, University of Liege, Sart-Tilman, Boulevard du Rectorat, 7, Building B31, 4000 Liege, Belgium;(3) Paris School of Economics and Ecole Normale Sup?rieure, Boulevard Jourdan, 48, Building B, 2nd floor, 75014 Paris, France;; |
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Abstract: | This paper studies the optimal linear tax-transfer policy in an economy where agents differ in productivity and in genetic
background and where longevity depends on health spending and genes. If agents internalize imperfectly the impact of health
spending on longevity, the utilitarian optimum can be decentralized with type-specific lump-sum transfers and Pigouvian taxes
correcting for agents’ myopia and for their misperception of health spending’s effects on the economy’s resources. The second-best
problem is examined under linear taxation instruments. It may be optimal to tax health spending, especially under complementarity
of genes and health spending in the production of longevity. |
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