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Intergenerational Conflict and International Risk Sharing

Author

Listed:
  • Martín Gonzalez Eiras

    () (Department of Economics, Universidad de San Andres & CONICETAuthor-Name: Leandro Arozamena)

Abstract

Existing models of foreign debt and insurance capacity assume that the costs and benefits of default are evenlydistributed across agents in the defaulting country. To study how tensions among different groups inside a country affect its sovereign risk management I consider an economy whose agents differ in their life spans. This makes the cost and benefits of default to be different across generations. The country is able to come up with a positive level of insurance by linking intergenerational transfers to the default decision of its citizens. This results is found both for the case of a Ramsey planner who cares for all present and future generations, and when decisions are taken by majority vote among living generations.

Suggested Citation

  • Martín Gonzalez Eiras, 2010. "Intergenerational Conflict and International Risk Sharing," Working Papers 106, Universidad de San Andres, Departamento de Economia, revised Sep 2010.
  • Handle: RePEc:sad:wpaper:106
    as

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    File URL: ftp://webacademicos.udesa.edu.ar/pub/econ/doc106.pdf
    File Function: First version, 2010
    Download Restriction: no

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sovereign debt and the age pyramid
      by Economic Logician in Economic Logic on 2010-10-29 20:08:00

    More about this item

    Keywords

    intergenerational; conflict; risk sharing;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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