The older the more valuable: divergence between utility and dollar values of life as one ages

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Abstract

While the utility value of life may decrease monotonically with age, the dollar value may increase dramatically until a fairly old age (by ten-fold to age 60 for one plausible set of parameters). Crucial for this result is a high enough real rate of interest (e.g. 4-5%) which makes accumulation desirable, leading to a lower marginal utility of money when one gets older, explaining the divergence. This divergence raises perplexing questions as to which value of life should be used and whether the old should be taxed and the young subsidized.

Original languageEnglish
Pages (from-to)1-16
Number of pages16
JournalJournal of Economics
Volume55
Issue number1
DOIs
Publication statusPublished - 1 Feb 1992

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