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Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange

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  • Antonio Rangel

Abstract

This paper develops a theory of intergenerational exchange for generations that are either selfish or have non-dynastic altruism. The main building blocks of the theory are forward and backward intergenerational goods (FIGs and BIGs) and the relationship between them. A FIG is a transfer from present to future generations, like parental investments in education and the preservation of the environment. A BIG is a transfer from future to present generations, like pay-as -you-go social security or taking care of elderly parents. We show that there is a fundamental difference between BIGs and FIGs. BIGs generating a positive surplus are self-sustainable, but FIGs never are. However, even with selfish generations, optimal investment in future generations can take place if the equilibrium social norm links BIGs and FIGs. The tools developed here can be used to understand a wide class of intergenerational problems, from the political economy of environmental treaties to the economics of seniority institutions. Two applications are developed in the paper: (1) the political economy of intergenerational public expenditures, and (2) investment in children within the family.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7518.

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Date of creation: Feb 2000
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Publication status: published as Rangel, Antonio. "Forward And Backward Intergenerational Goods: Why Is Social Security Good For The Environment?," American Economic Review, 2003, v93(3,Jun), 813-824.
Handle: RePEc:nbr:nberwo:7518

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  1. Antonio Rangel & Richard Zeckhauser, 1999. "Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?," Working Papers, Stanford University, Department of Economics 99003, Stanford University, Department of Economics.
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  13. Sandler, Todd & Doeleman, Jacobus A., 1998. "The Intergenerational Case of Missing Markets and Missing Voters," Staff General Research Papers 1217, Iowa State University, Department of Economics.
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Cited by:
  1. Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report, Federal Reserve Bank of Minneapolis 336, Federal Reserve Bank of Minneapolis.
  2. Poutvaara, Panu, 2004. "On the Political Economy of Social Security and Public Education," IZA Discussion Papers 1408, Institute for the Study of Labor (IZA).
  3. Poutvaara, Panu, 2004. "Gerontocracy revisited: Unilateral transfer to the young may benefit the middle-aged," Munich Reprints in Economics, University of Munich, Department of Economics 19295, University of Munich, Department of Economics.
  4. Banerjee, Abhijit V., 2004. "Educational policy and the economics of the family," Journal of Development Economics, Elsevier, Elsevier, vol. 74(1), pages 3-32, June.
  5. Antoine Bommier & Ronald Lee & Timothy Miller & Stephane Zuber, 2004. "Who Wins and Who Loses? Public Transfer Accounts for US Generations Born 1850 to 2090," NBER Working Papers 10969, National Bureau of Economic Research, Inc.
  6. Findeis, Jill L., 2002. "Subjective Equilibrium Theory of the Farm Household: Theory Revisited and New Directions," Workshop on the Farm Household-Firm Unit: Its Importance in Agriculture and Implications for Statistics, April 12-13, 2002, Wye Campus,Imperial College, International Agricultural Policy Reform and Ad 15723, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
  7. Abhijit Banerjee, 2007. "Educational Policy and the Economics of the Family," Working Papers id:1186, eSocialSciences.
  8. Andreas Wagener, 2002. "Intergenerational Transfer Schemes as Incomplete Social Contracts," Constitutional Political Economy, Springer, Springer, vol. 13(4), pages 337-359, December.

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