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Gerontocracy Revisited: Unilateral Transfer to the Young May Benefit the Middle-aged

  • Panu Poutvaara

According to conventional wisdom, intergenerational transfers can survive, in the absence of altruism, only if the old are net recipients. I prove that this need not hold in an overlapping generations model with a fixed factor. For example, the middle-aged owning land may gain by providing public education even when they cannot tax the young and when the young face no credit market constraints. This requires that labor is not mobile. Furthermore, establishing public education may benefit only the generation which pays for education twice, first for itself and then for the next generation.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 275.

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Date of creation: 22 May 2002
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Handle: RePEc:fer:dpaper:275
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  1. Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
  2. Cremer, H. & Kessler, D. & Pestieau, P., 1989. "Intergenerational Transfers Within The Family," CORE Discussion Papers 1989018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Antonio Rangel, 1999. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," Working Papers 00001, Stanford University, Department of Economics.
  4. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
  5. Kandori, Michihiro, 1992. "Repeated Games Played by Overlapping Generations of Players," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 81-92, January.
  6. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  7. Salant, David J., 1991. "A repeated game with finitely lived overlapping generations of players," Games and Economic Behavior, Elsevier, vol. 3(2), pages 244-259, May.
  8. Stefan Homburg, 1991. "Interest and Growth in an Economy with Land," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 450-59, May.
  9. 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.
  10. Konrad, Kai A, 1995. "Social Security and Strategic Inter-vivos Transfers of Social Capital," Journal of Population Economics, Springer, vol. 8(3), pages 315-26, August.
  11. Smith, Lones, 1992. "Folk theorems in overlapping generations games," Games and Economic Behavior, Elsevier, vol. 4(3), pages 426-449, July.
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