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Generational Accounts, Aggregate Saving and Intergenerational Distribution


  • Willem H. Buiter


Are generational accounts informative about the effect of the budget on the intergenerational distribution of resources and (when augmented with generation-specific propensities to consume out of life-time resources) on aggregate consumption and saving? The paper makes three points. First, the usefulness of generational accounts lives or dies with the strict life-cycle model of household consumption. Voluntary intergenerational gifts or liquidity constraints may therefore adversely affect or even destroy their informativeness. Second, even when the life-cycle model holds, generational accounts only measure the effect of the budget on the lifetime consumption of private goods and services. They ignore the intergenerational (re-)distribution associated with the government's provision of public goods and services. Third, generational accounting ignores the effect of the budget on before-tax and before-transfer quantities and prices, including before-tax and -transfer distribution of life-time resources across generations and intertemporal relative prices. That is, it does not handle incidence or general equilibrium repercussions very well. Although useful, generational accounts should therefore carry the label 'handle with great care.'

Suggested Citation

  • Willem H. Buiter, 1995. "Generational Accounts, Aggregate Saving and Intergenerational Distribution," NBER Working Papers 5087, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5087
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    References listed on IDEAS

    1. Auerbach, Alan J & Gokhale, Jagadeesh & Kotlikoff, Laurence J, 1992. " Generational Accounting: A New Approach to Understanding the Effects of Fiscal Policy on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 303-318.
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    5. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter.
    6. Willem H. Buiter & K.M. Kletzer, 1994. "Ponzi Finance, Government Solvency and the Redundancy or Usefulness of Public Debt," Cowles Foundation Discussion Papers 1070, Cowles Foundation for Research in Economics, Yale University.
    7. Regina Villela Malvar & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounting in Brazil," NBER Chapters,in: Generational Accounting around the World, pages 177-198 National Bureau of Economic Research, Inc.
    8. Laurence J. Kotlikoff & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "From Deficit Delusion to the Fiscal Balance Rule: Looking for an Economically Meaningful Way to Assess Fiscal Policy," NBER Chapters,in: Generational Accounting around the World, pages 9-30 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Gemma Abío & Eduard Berenguer & Holger Bonin & Joan Gil & Concepció Patxot, 2003. "Is the deficit under control? A generational accounting perspective on fiscal policy and labour market trends in Spain," Investigaciones Economicas, Fundación SEPI, vol. 27(2), pages 309-341, May.
    2. Otto Gandenberger, 2000. "Is the Fiscal Deficit Misconceived? Proponents of Generational Accounting Overstate their Case," CESifo Working Paper Series 282, CESifo Group Munich.
    3. Alper, C. Emre & Ardic, Oya Pinar & Mumcu, Ayse & Saglam, Ismail, 2008. "The welfare effects of government's preferences over spending and its financing," Economic Modelling, Elsevier, vol. 25(1), pages 1-12, January.
    4. Bernd Raffelhuschen & Laurence J. Kotlikoff, 1999. "Generational Accounting around the Globe," American Economic Review, American Economic Association, vol. 89(2), pages 161-166, May.
    5. Robert P. Hagemann & Christoph John, 1997. "Fiscal Reform In Sweden: What Generational Accounting Tells Us," Contemporary Economic Policy, Western Economic Association International, vol. 15(3), pages 1-12, July.
    6. Holger Bonin & Joan Gil & Concepció Patxot, 2001. "Beyond the Toledo agreement: the intergenerational impact of the Spanish Pension Reform," Spanish Economic Review, Springer;Spanish Economic Association, vol. 3(2), pages 111-130.
    7. Johannes Berger & Thomas Davoine & Philip Schuster & Ludwig Strohner, 2016. "Cross-country differences in the contribution of future migration to old-age financing," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(6), pages 1160-1184, December.
    8. Jan Babecky & Kamil Dybczak, 2009. "The Impact of Population Ageing on the Czech Economy," Working Papers 2009/1, Czech National Bank, Research Department.
    9. Hoevenaars, J. & Ponds, E.H.M., 2008. "Valuation of intergenerational transfers in collective funded pension schemes," Other publications TiSEM 2c1afa01-df29-490e-bc52-8, Tilburg University, School of Economics and Management.
    10. Jabłonowski, Janusz & Müller, Christoph & Raffelhüschen, Bernd, 2010. "A fiscal outlook for Poland using generational accounts," FZG Discussion Papers 47, University of Freiburg, Research Center for Generational Contracts (FZG).
    11. Kotlikoff, Laurence J., 2002. "Generational policy," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 27, pages 1873-1932 Elsevier.
    12. Hoevenaars, Roy P.M.M. & Ponds, Eduard H.M., 2008. "Valuation of intergenerational transfers in funded collective pension schemes," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 578-593, April.
    13. Nick Draper & Alex Armstrong, 2007. "GAMMA; a simulation model for ageing, pensions and public finances," CPB Document 147, CPB Netherlands Bureau for Economic Policy Analysis.
    14. Joaquim Levy & Ousmane Dore & Willi Leibfritz, 1999. "Generational Accounting for France," NBER Chapters,in: Generational Accounting around the World, pages 239-276 National Bureau of Economic Research, Inc.
    15. Poul Schou & Daniel le Maire & Steen Jørgensen, 2005. "Poor parents, rich children? - A hundred years of distribution," DREAM Working Paper Series 200501, Danish Rational Economic Agents Model, DREAM.
    16. Bodo Herzog, 2010. "Anwendung des Nachhaltigkeitsansatzes von Bohn zur Etablierung eines Frühindikators in den öffentlichen Finanzen Beitrag zur aktuellen Debatte der Föderalismuskommission II," Credit and Capital Markets, Credit and Capital Markets, vol. 43(2), pages 183-206.
    17. John Ablett, 1996. "Generational Accounting and Intergenerational Balance," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 3(4), pages 407-418.
    18. Alan J. Auerbach & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Introduction to "Generational Accounting around the World"," NBER Chapters,in: Generational Accounting around the World, pages 1-8 National Bureau of Economic Research, Inc.
    19. Svend E.. Hougaard Jensen & Bernd Raffelhuschen & Willi Leibfritz, 1999. "Public Debt, Welfare Reforms, and Intergenerational Distribution of Tax Burdens in Denmark," NBER Chapters,in: Generational Accounting around the World, pages 219-238 National Bureau of Economic Research, Inc.

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy


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