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Intergenerational Welfare Assessments

Author

Listed:
  • Sergi Barcons
  • Eduardo Dávila
  • Andreas Schaab

Abstract

This paper studies welfare assessments in economies with rich demographics. We introduce the notion of demographically disconnected economies, those with no date at which all individuals are concurrently alive. We identify the unique class of units that always enables meaningful welfare comparisons in such economies: those based on perpetual consumption, that is, consumption at all dates. Using these units, we uncover a novel possibility: feasible perturbations of Pareto efficient allocations can yield Kaldor-Hicks efficiency gains. We also introduce a decomposition that attributes intertemporal-sharing efficiency gains to financial frictions or demographic differences. These results allow us to derive new insights in three workhorse intergenerational models: (i) Samuelson (1958) two-date-life model, offering a novel rationale for social security; (ii) Diamond (1965) growth model, providing a new theory for capital taxation and capital over-/under-accumulation; and (iii) Samuelson (1958) three-date-life model, decomposing the efficiency gains from intergenerational transfers into frictional and demographic sources.

Suggested Citation

  • Sergi Barcons & Eduardo Dávila & Andreas Schaab, 2026. "Intergenerational Welfare Assessments," Opportunity and Inclusive Growth Institute Working Papers 123, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmoi:102340
    DOI: 10.21034/iwp.123
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    Keywords

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    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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