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Intergenerational Redistribution with Short-Lived Governments

  • Gene M. Grossman
  • Elhanan Helpman

We study the politics of intergenerational redistribution in an overlapping generations model with short-lived governments. The successive governmentsþwho care about the welfare of the currently living generations and possibly about campaign contributionsþare unable to pre-commit the future course of redistributive taxation. In a stationary politico-economic equilibrium, the tax rate in each period depends on the current value of the state variable and all expectations about future political outcomes are fulfilled. We find that there exist multiple stationary equilibria in many political settings. Steady-state welfare is often lower than it would be in the absence of redistributive politics.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5447.

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Date of creation: Jan 1996
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Publication status: published as Economic Journal, Vol. 108, no. 45 (September 1998): 1299-1325.
Handle: RePEc:nbr:nberwo:5447
Note: EFG PE
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  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
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  4. Dixit, Avinash K & Londregan, John, 1994. "The Determinants of Success of Special Interests in Redistributive Politics," CEPR Discussion Papers 1054, C.E.P.R. Discussion Papers.
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  8. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
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