Optimal public policy with endogenous mortality

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Authors

Ziramba, Emmanuel

Journal Title

Journal ISSN

Volume Title

Publisher

University of Pretoria, Department of Economics

Abstract

Using a monetary pure-exchange overlapping generations model, where the probability of survival of the young agents depends upon share of government expenditure on health, education and infrastructure, we analyze the welfare-maximizing policy mix between explicit and implicit taxation. We show that increases in the survival probability lead to an increase in the reliance on seigniorage as a welfare maximizing outcome. However, for our results to hold, the seigniorage tax base must be large enough for the benevolent planner to use the inflation tax.

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Keywords

Monetary pure exchange overlapping generations model, Probability of survival, Welfare maximizing policy mix

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Citation

Gupta, R & Ziramba, E 2008, 'Optimal public policy with endogenous mortality', University of Pretoria, Department of Economics, Working paper series, no. 2008-29. [http://web.up.ac.za/default.asp?ipkCategoryID=736&sub=1&parentid=677&subid=729&ipklookid=3]