Should We Subsidize Longevity?
Should we subsidize longevity?∗
M-L. Leroux†, P. Pestieau‡and G. Ponthiere§
September 30, 2008
This paper studies the design of the optimal non linear taxation in
an economy where longevity varies across agents, and depends on three
factors: longevity genes, health investment and farsightedness. Pro-
vided earnings, farsightedness and genes are correlated, governmental
intervention can be justified on two grounds: correction for a lack
of farsightedness and redistribution across both earnings and genetic
dimensions. Whether longevity-enhancing spending should be subsi-
dized or taxed is shown to depend on the combined effects of myopia,
self-selection and free-riding on the annuity returns. Our policy con-
clusions depend also on how productivity and genes are correlated, on
the complementarity of genes and efforts in the survival function, and
on how the government weights the welfare of heterogeneous agents.
All in all, it might be desirable to tax longevity-enhancing spending.
Keywords: optimal taxation, longevity, genetic background, het-
JEL codes: H21, I10
∗The authors thank Erik Schokkaert for his helpful comments on this paper.
†CORE, Université catholique de Louvain, Belgium.
‡University of Liege, CREPP, CORE, PSE and CEPR.
§PSE and Ecole Normale Supérieure (Paris). Address: 48 Boulevard Jourdan, 75014
Paris, France. E-mail: firstname.lastname@example.org
Should the government subsidize longevity?
At first glance, that question sounds more provocative than really rel-
evant, as this seems to question something unquestionable. Clearly, there
can be no doubt that the large rise in longevity that we are witnessing is a
good thing.1 Moreover, it seems also obvious that, keeping everything else
constant, “more life is generally better than less life”. Hence, it is tempting
to conclude that the government should intervene to promote longer lives.
However, by no way do those con