Unequal longevities and lifestyles transmission

Abstract

Whereas studies on the optimal taxation under endogenous longevity assume a fixed heterogeneity of lifestyles, this paper considers the optimal tax policy in an economy where unequal longevities are the unintended outcome of differences in lifestyles, and where lifestyles are transmitted across generations. For that purpose, we develop a three-period OLG model where the population, who ignores the negative impact of excessive work on longevity, is partitioned in two groups with different tastes for leisure, and follows an adaptation/imitation process à la Bisin and Verdier (2001). The optimal short-run and long-run Pigouvian taxes on wages are shown to differ, because the latter correct agents'myopia, but also internalize intergenerational externalities due to the socialization process.longevity ; OLG model ; lifestyle ; socialization ; intergenerational externalities ; Pigouvian taxes