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Solution Concept for Intergenerational Conflict: the Role of Intergenerational Bargaining

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  • Yusuke Kinai

    (Graduate School of Economics, Osaka University)

Abstract

This paper specifically examines intergenerational conflict and analyzes an overlapping generations model of public goods provision from the viewpoint of time-consistency. Public goods are financed through labor-income and capital-income taxation, thereby distorting savings and the labor supply. Taxes redistribute income across generations in the form of public goods. Under such a situation, there emerge dual intergenerational conflicts: the first is related to the amount of public goods and the second is the tax burden. We then contrast the politico-economic equilibrium with commitment allocation, and analyze the sources of conflict and time-inconsistency, and attempt to resolve such a conflict by introducing the concept of eintergenerational bargaining f. Our main findings are the following. First, taxation derived using Lagrange method fails to be time-consistent. Second, depending on bargainingpower, taxation based on intergenerational bargaining can be time-consistent. Third, we portray the properties of taxation and public goods provision rules based on intergenerational bargaining.

Suggested Citation

  • Yusuke Kinai, 2011. "Solution Concept for Intergenerational Conflict: the Role of Intergenerational Bargaining," Discussion Papers in Economics and Business 11-10, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1110
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    References listed on IDEAS

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    1. Grégory De Walque, 2005. "Voting on Pensions: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 19(2), pages 181-209, April.
    2. Holtz-Eakin, Douglas & Lovely, Mary E. & Tosun, Mehmet S., 2004. "Generational conflict, fiscal policy, and economic growth," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 1-23, March.
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    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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