Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102657
Authors: 
Stelter, Robert
Year of Publication: 
2014
Series/Report no.: 
Thünen-Series of Applied Economic Theory 137
Abstract: 
This paper investigates the problem of an \optimum population" concerning age structures in a 3-period OLG-model with endogenous fertility and longevity. The first-best solution for a number-dampened total social welfare function, including Millian and Benthamite utilitarianism as two extreme cases, identifies the optimal age structure, generally failed in the laissez-faire economy. Individuals over-invest in health expenditures and choose a non-optimal number of offspring. A calibration exercise for 80 countries emphasizes that mean ages in the optimal solution with the highest feasible individual utility exceed the observed in all countries, especially due to a very low first-best number of children. Introducing a preference for the population stock in the social welfare function increases fertility, but reduces individual utility, in the first-best solution. Optimal mean age shrinks and an over-aging of the laissez-faire economy becomes more likely. To decentralize first-best solutions health expenditures are taxed, whereas children are either taxed or subsided.
Subjects: 
endogenous fertility
adult mortality
optimal age structure
over-aging
optimal taxation
JEL: 
H20
I10
J18
Document Type: 
Working Paper

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