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Some Inefficiency Implications Of Generational Politics And Exchange

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  • LAURENCE J. KOTLIKOFF
  • ROBERT W. ROSENTHAL

Abstract

This paper explores the implications of generational selfishness in a model in which each generation has its own government. Such selfish generational governments will potentially distort the economy along a number of dimensions. One is the monopolization of factor supplies; another is the under- or overprovision of durable public goods. We demonstrate that selfish generations may place sizable marginal taxes on their factor supplies in order to monopolize their factor markets. We also show that selfish generations will provide inefficient levels of durable public goods both at the local and national levels. Finally, we demonstrate that generational inefficiencies can arise even in models of cooperative bargaining because of the first-mover advantage of earlier generations. Copyright 1993 Blackwell Publishers Ltd..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Economics & Politics.

Volume (Year): 5 (1993)
Issue (Month): 1 (03)
Pages: 27-42

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Handle: RePEc:bla:ecopol:v:5:y:1993:i:1:p:27-42

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  1. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  2. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-44, September.
  3. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
  4. Kotlikoff, Laurence J & Persson, Torsten & Svensson, Lars E O, 1988. "Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem," American Economic Review, American Economic Association, vol. 78(4), pages 662-77, September.
  5. Sadka, Efraim, 1976. "On Income Distribution, Incentive Effects and Optimal Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 261-67, June.
  6. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  7. Joseph E. Stiglitz, 1982. "The Theory of Local Public Goods Twenty-Five Years After Tiebout: A Perspective," NBER Working Papers 0954, National Bureau of Economic Research, Inc.
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Cited by:
  1. Martin Gonzalez Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," Working Papers 72, Universidad de San Andres, Departamento de Economia, revised Jun 2004.
  2. Antonio Rangel, 2005. "How to Protect Future Generations Using Tax-Base Restrictions," American Economic Review, American Economic Association, vol. 95(1), pages 314-346, March.
  3. M. Magnani, 2005. "Labour market regulation and retirement age," Economics Department Working Papers 2005-EP02, Department of Economics, Parma University (Italy).
  4. Antonio Rangel, 2002. "How to Protect Future Generations Using Tax Base Restrictions," NBER Working Papers 9179, National Bureau of Economic Research, Inc.
  5. Antonio Rangel, 1999. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," Working Papers 00001, Stanford University, Department of Economics.
  6. Cellarier, Laurent L., 2013. "A family production overlapping generations economy," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2168-2179.
  7. Glazer, Amihai & Kanniainen, Vesa & Niskanen, Esko, 2003. "Bequests, control rights, and cost-benefit analysis," European Journal of Political Economy, Elsevier, vol. 19(1), pages 71-82, March.

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