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Intra-Generational Externalities and Inter-Generational Transfers

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  • Martin Kolmar
  • Volker Meier

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Abstract

In an environment with asymmetric information the implementation of a first-best efficient Clarke-Groves-Vickrey (D’Aspremont-Gérard-Varet) mechanism may not be feasible if it has to be self-financing. By using intergenerational transfers, the arising budget deficit can generally be covered in every generation if the growth rate of the economy is positive. This result yields an alternative explanation for the existence of pay-as-you-go financed transfer mechanisms.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1437.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1437

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Keywords: pay-as-you-go; externalities; mechanism design; adverse selection;

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Cited by:
  1. Wolfgang Eggert & Tim Krieger & Volker Meier, 2009. "Education, unemployment and migration," Working Papers CIE 7, University of Paderborn, CIE Center for International Economics.
  2. Martin Gonzalez Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," Working Papers, Universidad de San Andres, Departamento de Economia 72, Universidad de San Andres, Departamento de Economia, revised Jun 2004.

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