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

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  • Poutvaara Panu

Abstract

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.

Suggested Citation

  • Poutvaara Panu, 2002. "Gerontocracy Revisited: Unilateral Transfer to the Young May Benefit the Middle-aged," Discussion Papers 275, Government Institute for Economic Research Finland (VATT).
  • Handle: RePEc:fer:dpaper:275
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    References listed on IDEAS

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    1. Michihiro Kandori, 1992. "Repeated Games Played by Overlapping Generations of Players," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 81-92.
    2. Cremer, Helmuth & Kessler, Denis & Pestieau, Pierre, 1992. "Intergenerational transfers within the family," European Economic Review, Elsevier, pages 1-16.
    3. 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.
    4. Smith, Lones, 1992. "Folk theorems in overlapping generations games," Games and Economic Behavior, Elsevier, vol. 4(3), pages 426-449, July.
    5. Antonio Rangel, 1999. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," Working Papers 00001, Stanford University, Department of Economics.
    6. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-774, September.
    7. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
    8. Stefan Homburg, 1991. "Interest and Growth in an Economy with Land," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 450-459, May.
    9. 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.
    10. Konrad, Kai A, 1995. "Social Security and Strategic Inter-vivos Transfers of Social Capital," Journal of Population Economics, Springer;European Society for Population Economics, vol. 8(3), pages 315-326, August.
    11. 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.
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    Citations

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    Cited by:

    1. Marko Kothenbürger & Panu Poutvaara, 2006. "Social Security Reform and Investment in Education: Is There Scope for a Pareto Improvement?," Economica, London School of Economics and Political Science, pages 299-319.
    2. Marko Koethenbuerger & Panu Poutvaara, 2009. "Rent taxation and its intertemporal welfare effects in a small open economy," International Tax and Public Finance, Springer;International Institute of Public Finance, pages 697-709.
    3. Gersbach, Hans & Siemers, Lars-H. R., 2010. "Land Reforms And Economic Development," Macroeconomic Dynamics, Cambridge University Press, vol. 14(04), pages 527-547, September.
    4. Iñigo Iturbe-Ormaetxe & Guadalupe Valera, 2012. "Social security reform and the support for public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 609-634, January.
    5. Torben M. Andersen & Joydeep Bhattacharya, 2013. "The Intergenerational Welfare State," CESifo Working Paper Series 4359, CESifo Group Munich.
    6. Gersbach, Hans & Siemers, Lars, 2005. "Can Democracy Educate a Society?," IZA Discussion Papers 1693, Institute for the Study of Labor (IZA).
    7. Torben M. Andersen & Joydeep Bhattacharya & Pan Liu, 2016. "Resolving Intergenerational Conflict over the Environment under the Pareto Criterion," CESifo Working Paper Series 6053, CESifo Group Munich.

    More about this item

    Keywords

    Intergenerational goods; Education; Land; Gerontocracy; Economic growth; Taloudellinen kasvu; Public services; Julkiset palvelut; Taxation and Social Transfers; Julkisen talouden rahoitus ja tulonsiirrot; C000 - Mathematical and Quantitative Methods: General; H520 - National Government Expenditures and Education; I200 - Education: General; J120 - Marriage; Marital Dissolution; Family Structure; J620 - Job; Occupational; and Intergenerational Mobility; Promotion; O150 - Economic Development: Human Resources; Human Development; Income Distribution; Migration (nutrition; health; education; fertility; household structure and formation; labor markets);

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • I20 - Health, Education, and Welfare - - Education - - - General
    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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