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| Marie-Louise Leroux |
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| ''Differential Mortality, Moral Hazard and Optimal Taxation'' |
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| This paper studies the normative problem of redistribution between individuals who can influence their longevity through a non monetary effort but who have different taste for effort. Since effort is non monetary, it is reasonable to assume that the social planner has no control on it. Thus, we study a model with moral hazard constraints. In this first best, early consumption is preferred to future consumption and the high-survival individual obtains higher future consumption. In the second best solution, there is no distortion for the low-taste for effort individual but the trade-off between two-period consumptions is distorted upward for the high-taste individual. We still find that early consumption should be encouraged for both individuals under asymmetric information. |
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| Keywords: Annuities, Effort, Moral Hazard, Differential Mortality, Taxation |
JEL: H3 - Fiscal Policies and Behavior of Economic Agents: General
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| Manuscript Received : Feb 28 2008 | | Manuscript Accepted : Feb 28 2008 |
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