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Pareto-Improving Intergenerational Transfers

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  • Berthold U. Wigger

Abstract

In the presence of endogenous growth intergenerational transfer from the young to the old reduce per capita income growth and harm future generations. On the other hand, competitive equilibria are inefficient if externalities sustain long-run growth. This paper shows that if individuals retire in the last period of their life, the inefficiency of the market economy can be removed by an investment subsidy without making the current or future generations worse off only if coupled with intergenerational transfers from the young to the old.

Suggested Citation

  • Berthold U. Wigger, 2000. "Pareto-Improving Intergenerational Transfers," CESifo Working Paper Series 285, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_285
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp285.pdf
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Pascal Belan & Philippe Michel & Pierre Pestieau, 1998. "Pareto-Improving Social Security Reform," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 23(2), pages 119-125, December.
    3. Gilles Saint-Paul, 1992. "Fiscal Policy in an Endogenous Growth Model," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1243-1259.
    4. Jappelli, Tullio & Pagano, Marco, 1999. "The Welfare Effects of Liquidity Constraints," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 410-430, July.
    5. Boldrin, Michele, 1992. "Dynamic externalities, multiple equilibria, and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 198-218, December.
    6. Jones, Larry E. & Manuelli, Rodolfo E., 1992. "Finite lifetimes and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 171-197, December.
    7. Grossman, Gene M. & Yanagawa, Noriyuki, 1993. "Asset bubbles and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 31(1), pages 3-19, February.
    8. King, Ian & Ferguson, Don, 1993. "Dynamic inefficiency, endogenous growth, and Ponzi games," Journal of Monetary Economics, Elsevier, vol. 32(1), pages 79-104, August.
    9. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
    10. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Citations

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    Cited by:

    1. Kolmar, Martin & Meier, Volker, 2012. "Intragenerational externalities and intergenerational transfers," Journal of Pension Economics and Finance, Cambridge University Press, vol. 11(04), pages 531-548, October.
    2. Berthold U. Wigger & Robert K. von Weizs?cker, 2001. "Risk, Resources, and Education: Public Versus Private Financing of Higher Education," IMF Staff Papers, Palgrave Macmillan, vol. 48(3), pages 1-6.
    3. Andreas Irmen & Berthold U. Wigger, 2002. "Trade Union Objectives and Economic Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(1), pages 1-49, February.
    4. Weizsäcker, Robert K. von & Wigger, Berthold U., 2001. "Rentenfinanzierung und intergenerationelle Gerechtigkeit : Eine wachstumstheoretische Perspektive," Discussion Papers 606, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    5. Yew, Siew Ling & Zhang, Jie, 2013. "Socially optimal social security and education subsidization in a dynastic model with human capital externalities, fertility and endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 154-175.
    6. Berthold U. Wigger, 2001. "Higher Education Financing and Income Redistribution," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(1), pages 1-48, December.
    7. Berthold Wigger, 2005. "Public Debt, Human Capital Formation, and Dynamic Inefficiency," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(1), pages 47-59, January.
    8. Kaas, Leo, 2003. "Productive government spending, growth, and sequential voting," European Journal of Political Economy, Elsevier, vol. 19(2), pages 227-246, June.

    More about this item

    Keywords

    Intergenerational transfers; externalities; endogenous growth;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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