Abstract
In a general-equilibrium OLG model with endogenous longevity, a political economy and a social planner solution are contrasted mainly with respect to public supplies of health care and environment protection. The latter is relatively more supported by the young because its beneficial effect on longevity takes more time to occur but then lasts longer; while the old relatively prefer health spending. With population aging, political claims for health care expenditure are self-reinforcing. This framework is able to generate a quite rich set of results. In the political economy larger health care/consumption and health care/environmental quality ratios are implemented. Changes in risk aversion, production pollution, health inputs’ elasticity of substitution may have opposite impacts across regimes. More complete annuity markets improve welfare. Further comparative statics is analyzed.
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