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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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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0954-1985

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  1. 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.
  2. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  3. 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.
  4. 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.
  5. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  6. Joseph E. Stiglitz, 1984. "The Theory of Local Public Goods Twenty-Five Years After Tiebout: A Perspective," NBER Working Papers 0954, National Bureau of Economic Research, Inc.
  7. 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.
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Cited by:
  1. Amihai Glazer & Vesa Kanniainen & Esko Niskanen, 2001. "Bequests, Control Rights, and Cost-Benefit Analysis," CESifo Working Paper Series 576, CESifo Group Munich.
  2. Gonzales-Eiras, Martín & Niepelt, Dirk, 2004. "Sustaining Social Security," Seminar Papers 731, Stockholm University, Institute for International Economic Studies.
  3. Antonio Rangel, 2000. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," NBER Working Papers 7518, National Bureau of Economic Research, Inc.
  4. M. Magnani, 2005. "Labour market regulation and retirement age," Economics Department Working Papers 2005-EP02, Department of Economics, Parma University (Italy).
  5. Antonio Rangel, 2002. "How to Protect Future Generations Using Tax Base Restrictions," NBER Working Papers 9179, National Bureau of Economic Research, Inc.
  6. 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.

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