Transfers versus Public Investment: The Politics of Intergenerational Redistribution and Growth
In this paper we analyze tax and transfer choices in an OLG economy with capital accumulation and endogenous growth coming from public investment, such as education. We solve for a Markov perfect equilibrium when electoral competition targets the votes of young and old households. We find that when calibrating the model to match US data, it predicts levels of intergenerational transfers and of public investments that are similar to the observed ones. Furthermore the Ramsey policy for the same parameters would call for both generations to be taxed to finance public investment. If the political process internalized the benefits that public investment has on future generations, growth would be twice as high as currently observed
|Date of creation:||03 Dec 2006|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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- Michele Boldrin & Ana Montes, 2005.
"The Intergenerational State Education and Pensions,"
Review of Economic Studies,
Oxford University Press, vol. 72(3), pages 651-664.
- Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers.
- Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
- Janice Bell, 2001. "The Political Economy of Reform in Post-Communist Poland," Books, Edward Elgar Publishing, number 1810.
- repec:wop:bodewp:218 is not listed on IDEAS
- Giorgio Bellettini & Carlotta Berti Ceroni, 1999. "Is Social Security Really Bad for Growth?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 796-819, October.
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