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Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange

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Author Info
Antonio Rangel

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Abstract

December 1999

This papers 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.

JEL codes: H0, H3, H4, I2, D1, D7, C7, E6

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Paper provided by Stanford University, Department of Economics in its series Working Papers with number 00001.

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Date of creation: Dec 1999
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Handle: RePEc:wop:stanec:00001

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Find related papers by JEL classification:
H0 - Public Economics - - General
H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
H4 - Public Economics - - Publicly Provided Goods
I2 - Health, Education, and Welfare - - Education
D1 - Microeconomics - - Household Behavior
D7 - Microeconomics - - Analysis of Collective Decision-Making
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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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.:
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  2. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February. [Downloadable!] (restricted)
  3. Bhaskar, V, 1998. "Informational Constraints and the Overlapping Generations Model: Folk and Anti-Folk Theorems," Review of Economic Studies, Blackwell Publishing, vol. 65(1), pages 135-49, January. [Downloadable!] (restricted)
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  4. Henk Folmer & Pierre Mouche & Shannon Ragland, 1993. "Interconnected games and international environmental problems," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(4), pages 313-335, August. [Downloadable!] (restricted)
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  13. 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. [Downloadable!] (restricted)
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  1. Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. 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 15723, International Agricultural Policy Reform and Adjustment Project (IAPRAP). [Downloadable!]
  3. Panu Poutvaara, 2002. "Gerontocracy Revisited: Unilateral Transfer to the Young May Benefit the Middle-aged," Discussion Papers 275, Government Institute for Economic Research Finland (VATT). [Downloadable!]
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  4. Abhijit Banerjee, 2007. "Educational Policy and the Economics of the Family," Working Papers id:1186, esocialsciences.com. [Downloadable!]
  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. [Downloadable!] (restricted)
  6. Panu Poutvaara, 2001. "On the Political Economy of Social Security and Public Education," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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