Generational Accounts, Aggregate Saving and Intergenerational Distribution
AbstractAre generational accounts informative about the effect of the budget on the intergenerational distribution of resources and (when augmented with generation-specific propensities to consume out of life-time resources) on aggregate consumption and saving? The paper makes three points. First, the usefulness of generational accounts lives or dies with the strict life-cycle model of household consumption. Voluntary intergenerational gifts or liquidity constraints may therefore adversely affect or even destroy their informativeness. Second, even when the life-cycle model holds, generational accounts only measure the effect of the budget on the lifetime consumption of private goods and services. They ignore the intergenerational (re-)distribution associated with the government's provision of public goods and services. Third, generational accounting ignores the effect of the budget on before-tax and before-transfer quantities and prices, including before-tax and -transfer distribution of life-time resources across generations and intertemporal relative prices. That is, it does not handle incidence or general equilibrium repercussions very well. Although useful, generational accounts should therefore carry the label 'handle with great care.'
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5087.
Date of creation: Apr 1995
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Publication status: published as Economica, Vol.64 (1997), pp. 605-626.
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Other versions of this item:
- Buiter, Willem H, 1997. "Generational Accounts, Aggregate Saving and Intergenerational Distribution," Economica, London School of Economics and Political Science, vol. 64(256), pages 605-26, November.
- Willem H. Buiter, 1996. "Generational Accounts, Aggregate Savings, and Intergenerational Distribution," IMF Working Papers 96/76, International Monetary Fund.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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