Fair Accumulation under Risky Lifetime

Grégory Ponthière (1, 2)

1 PSE - Paris-Jourdan Sciences Economiques
2 PSE - Paris School of Economics

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-o¤ 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.

Mots clés: Egalitarianism; Differentiated Mortality; Optimal Capital Accumulation; Golden Rule; Fertility

Domaines: Economies et finances

Grégory Ponthière. Fair Accumulation under Risky Lifetime. 2012. ⟨halshs-00746913⟩