Intergenerational Conflict and International Risk Sharing
AbstractExisting models of foreign debt and insurance capacity assume that the costs and benefits of default are evenlydistributed across agents in the defaulting country. To study how tensions among different groups inside a country affect its sovereign risk management I consider an economy whose agents differ in their life spans. This makes the cost and benefits of default to be different across generations. The country is able to come up with a positive level of insurance by linking intergenerational transfers to the default decision of its citizens. This results is found both for the case of a Ramsey planner who cares for all present and future generations, and when decisions are taken by majority vote among living generations.
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Bibliographic InfoPaper provided by Universidad de San Andres, Departamento de Economia in its series Working Papers with number 106.
Length: 30 pages
Date of creation: Sep 2010
Date of revision: Sep 2010
intergenerational; conflict; risk sharing;
Find related papers by JEL classification:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-09 (All new papers)
- NEP-DGE-2010-10-09 (Dynamic General Equilibrium)
- NEP-IAS-2010-10-09 (Insurance Economics)
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