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Fiscal Policy With Impure Intergenerational Altruism

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Author Info
Andrew B. Abel
B. Douglas Bernheim

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Abstract

Recent work demonstrates that dynastic assumptions guarantee the irrelevance of all redistributional polices, distortionary taxes, and prices--the neutrality of fiscal policy (Ricardian equivalence) is only the "tip of the iceberg." In this paper, we investigate the possibility of reinstating approximate Ricardian equivalence. by introducing a small amount of friction in intergenerational links. If Ricardian equivalence depends upon significantly shorter chains of links than do these stronger neutrality results, then friction my dissipate the effects that generate strong neutrality, without significantly affecting the Ricardian result. Although this intuition turns out to be essentially correct, we show that models with small amounts of friction have other untenable implications. We conclude that the theoretical case for Ricardian equivalence remains tenuous.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2613.

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Date of creation: Jan 1992
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Handle: RePEc:nbr:nberwo:2613

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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.:
  1. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Jorge E. Araña & Carmelo J. León, 2002. "Willingness to pay for health risk reduction in the context of altruism," Health Economics, John Wiley & Sons, Ltd., vol. 11(7), pages 623-635. [Downloadable!]
  2. Preston J. Miller & William Roberds, 1992. "How little we know about deficit policy effects," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11. [Downloadable!]
  3. Richard N. Vaughan, . "Intergenerational Altruism, Ricardian Equivalence and the Relevance of Distributional Policy," ELSE working papers 052, ESRC Centre on Economics Learning and Social Evolution. [Downloadable!]
  4. B. Douglas Bernheim & Sergei Severinov, 2000. "Bequests as Signals: An Explanation for the Equal Division Puzzle," NBER Working Papers 7791, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Preston J. Miller & Will Roberds, 1989. "How little we know about budget policy effects," Staff Report 120, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  6. Eduardo Ley, 1996. "Optimal Provision of Public Goods with Altruistic Individuals," Public Economics 9607001, EconWPA, revised 06 Oct 2001. [Downloadable!]
    Other versions:
  7. Philippe Méral, 1998. "Future generations and economic activities: The case of the social discount rate," Forum for Social Economics, Springer, vol. 27(2), pages 1-14, March. [Downloadable!] (restricted)
  8. B. Douglas Bernheim, 1987. "Intergenerational Altruism and Social Welfare: A Critique of the Dynastic Model," NBER Working Papers 2288, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Uhlig, H. & Yanagawa, N., 1994. "Increasing the Capital Income Tax Leads to Faster Growth," Discussion Paper 115, Tilburg University, Center for Economic Research. [Downloadable!]
  10. Richard Howarth & Richard Norgaard, 1993. "Intergenerational transfers and the social discount rate," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(4), pages 337-358, August. [Downloadable!] (restricted)
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