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Intergenerational Redistribution with Short-lived Governments

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Author Info
Grossman, Gene
Helpman, Elhanan

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Abstract

We study the politics of intergenerational redistribution in an overlapping-generations model with short-lived governments. The successive governments – who care about the welfare of the currently-living generations and possibly about campaign contributions – are unable to pre-commit the future course of redistributive taxation. In a stationary politico-economic equilibrium, the tax rate in each period depends on the current state of the economy and all expectations about future political outcomes are fulfilled. We find that multiple stationary equilibria exist in many political settings. Steady-state welfare is often lower than it would be in the absence of redistributive politics.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1396.

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Date of creation: May 1996
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Handle: RePEc:cpr:ceprdp:1396

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Keywords: Generations Redistribution

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Find related papers by JEL classification:
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
H1 - Public Economics - - Structure and Scope of Government
H2 - Public Economics - - Taxation, Subsidies, and Revenue

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  16. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January. [Downloadable!] (restricted)
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  1. Sita Slavov, 2006. "Age Bias in Fiscal Policy: Why Does the Political Process Favor the Elderly?," Topics in Theoretical Economics, Berkeley Electronic Press, vol. 6(1), pages 1279-1279. [Downloadable!] (restricted)
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  2. Bernard M.S. van Praag & Pedro Cardoso, 2003. "The Mix Between Pay-as-you-go and Funded Pensions and What Demography Has to Do with it," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  3. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, 2006. "Early Retirement and Social Security: A Long Term Perspective," CSEF Working Papers 165, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]
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  4. Giorgio Bellettini & Gianmarco I.P. Ottaviano, 2003. "Special Interests and Technological Change," Working Papers 2003.59, Fondazione Eni Enrico Mattei. [Downloadable!]
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  5. Martín Gonzales-Eiras & Dirk Niepelt, 2007. "Population Ageing, Government Budgets, and Productivity Growth in Politico-Economic Equilibrium," Working Papers 07.05, Swiss National Bank, Study Center Gerzensee. [Downloadable!]
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  6. J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "Positive Arithmetic of the Welfare State," Working Papers 2003-04, FEDEA. [Downloadable!]
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  7. John Hassler et al., 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March. [Downloadable!] (restricted)
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  8. Martín Gonzalez-Eiras & Dirk Niepelt, 2005. "Sustaining Social Security," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  9. Ryo Arawatari & Tetsuo Ono, 2008. "Aging, Inequality and Social Security," Discussion Papers in Economics and Business 08-19, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  10. Uk Hwang & Francesco Magris, 2005. "Intergenerational Conflicts and the Resource Policy Formation of a Short-Lived Government," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(III), pages 437-457, September. [Downloadable!]
  11. Strulik, H., 1999. "Fiscal Policy Reforms in a Global Economy," Electronic-Only (EO) Working Papers 9902, Faculty of Economics, University of Cambridge. [Downloadable!]
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  12. Jean-Pierre Laffargue, 2008. "Intergenerational transfers and the stability of public debt with short-lived governments," Post-Print halshs-00270503_v1, HAL. [Downloadable!]
  13. Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January. [Downloadable!] (restricted)
  14. Per Krusell & Jose-Victor Rios-Rull, 1999. "On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model," American Economic Review, American Economic Association, vol. 89(5), pages 1156-1181, December. [Downloadable!] (restricted)
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  15. Ryo Arawatari & Tetsuo Ono, 2008. "A Second Chance at Success: A Political Economy Perspective?," Discussion Papers in Economics and Business 08-04, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  16. Roland Benabou, 1996. "Unequal Societies," NBER Working Papers 5583, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Hans Gersbach & Lars Siemers, 2005. "Can Democracy Educate a Society?," IZA Discussion Papers 1693, Institute for the Study of Labor (IZA). [Downloadable!]
  18. Lars-Erik Borge & Jørn Rattsø, 2007. "Young and old competing for public welfare services," Working Paper Series 8607, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
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