According to conventional wisdom, intergenerational transfers can survive, in the absence of altruism, only if the old are net recipients. I prove that this need not hold in an overlapping generations model with a fixed factor. For example, the middle-aged owning land may gain by providing public education even when they cannot tax the young and when the young face no credit market constraints. This requires that labor is not mobile. Furthermore, establishing public education may benefit only the generation which pays for education twice, first for itself and then for the next generation.
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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number
275.
Length: Date of creation: 22 May 2002 Date of revision: Handle: RePEc:fer:dpaper:275
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Find related papers by JEL classification: O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure I20 - Health, Education, and Welfare - - Education - - - General C00 - Mathematical and Quantitative Methods - - General - - - General J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
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