The intergenerational state: education and pensions
AbstractWhen credit markets to finance investment in human capital are missing, the competitive equilibrium allocation is inefficient. When generations overlap, this failure can be mitigated by properly designed social arrangements. We show that public financing of education and public pensions can be designed to implement an intergenerational transfer scheme supporting the complete market allocation. Neither the public financing of education nor the pension scheme we consider resemble standard ones. In our mechanism, via the public education system, the young borrow from the middle aged to invest in human capital. They pay back the debt via a social security tax, the proceedings of which finance pension payments. When the complete market allocation is achieved, the rate of return implicit in this borrowing-lending scheme should equal the market rate of return.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 336.
Date of creation: 2004
Date of revision:
Publication status: Published in Review of Economic Studies> (Vol. 72, No. 3, July 2005, pp. 651-664)
Other versions of this item:
- Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
- Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers.
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- I20 - Health, Education, and Welfare - - Education - - - General
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laurence J. Kotlikoff & Avia Spivak, 1979.
"The Family as an Incomplete Annuities Market,"
UCLA Economics Working Papers
151, UCLA Department of Economics.
- Alan J. Auerbach & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounting around the World," NBER Books, National Bureau of Economic Research, Inc, number auer99-1, May.
- Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
- Barro, R.J. & Becker, G.S., 1988.
"Fertility Choice In A Model Of Economic Growth,"
University of Chicago - Economics Research Center
88-8, Chicago - Economics Research Center.
- Robert J. Barro & Gary S. Becker, . "Fertility Choice in a Model of Economic Growth," University of Chicago - Population Research Center 88-8, Chicago - Population Research Center.
- Laurence J. Kotlikoff & Torsten Persson & Lars E.O. Svensson, 1986. "Laws as Assets: A Possible Solution to the Time Consistency Problem," NBER Working Papers 2068, National Bureau of Economic Research, Inc.
- Michele Boldrin, 1992.
"Public Education and Capital Accumulation,"
1017, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Cremer, H. & Kessler, D. & Pestieau, P., 1989.
"Intergenerational Transfers Within The Family,"
CORE Discussion Papers
1989018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cass, David, 1972. "Distinguishing inefficient competitive growth paths: A note on capital overaccumulation and rapidly diminishing future value of consumption in a fairly general model of capitalistic production," Journal of Economic Theory, Elsevier, vol. 4(2), pages 224-240, April.
- Robert C. Merton, 1981. "On the Role of Social Security as a Means for Efficient Risk-Bearing in an Economy Where Human Capital Is Not Tradeable," NBER Working Papers 0743, National Bureau of Economic Research, Inc.
- 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.
- Neher, Philip A, 1971. "Peasants, Procreation, and Pensions," American Economic Review, American Economic Association, vol. 61(3), pages 380-89, June.
- Antonio Rangel, 2000.
"Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange,"
NBER Working Papers
7518, National Bureau of Economic Research, Inc.
- Antonio Rangel, 1999. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," Working Papers 00001, Stanford University, Department of Economics.
- Giorgio Bellettini & Carlotta Berti Ceroni, 1995.
"Is Social Security Really Bad For Growth?,"
218, Dipartimento Scienze Economiche, Universita' di Bologna.
- repec:wop:bodewp:218 is not listed on IDEAS
- Becker, Gary S & Murphy, Kevin M, 1988.
"The Family and the State,"
Journal of Law and Economics,
University of Chicago Press, vol. 31(1), pages 1-18, April.
- Gary S. Becker & Kevin M. Murphy, . "The Family and the State," University of Chicago - Population Research Center 87-15, Chicago - Population Research Center.
- Kehoe, Timothy J & Levine, David K, 2001. "Liquidity Constrained Markets versus Debt Constrained Markets," Econometrica, Econometric Society, vol. 69(3), pages 575-98, May.
- Michele Boldrin & Larry E. Jones, 2002. "Mortality, Fertility, and Saving in a Malthusian Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 775-814, October.
- Ana Montes, 2002. "Educación para los jóvenes y pensiones para los mayores: ¿Existe alguna relación? Evidencia para España," Investigaciones Economicas, Fundación SEPI, vol. 26(1), pages 145-185, January.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janelle Ruswick).
If references are entirely missing, you can add them using this form.