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Journal Articles Scottish Journal of Political Economy Year : 2013

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.

Dates and versions

hal-00813231 , version 1 (15-04-2013)

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Cite

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