Abstract
AbstractIndividuals 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‐off 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.
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