Intergenerational Intermediation and Altruistic Preferences
The paper analyzes the intermediation role of government under the assumption that it has an advantage over the private sector in collecting uncollateralized loan payments. It isshown that a government loan program may improve the welfare of all generations (including the current old generation) if agents care about future generations in the time inconsistent manner originally proposed by Phelps and Pollak (1968). Numerical examples suggest that the welfare gains from intervention may be quite large and depends on the degree of altruism as defined by Phelps and Pollak. The welfare gains are large when agents are relatively ï¿½egoisticï¿½ because in this case the time inconsistency problem is more severe and there is more room for intervention.
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- Barro, Robert J, 1974.
"Are Government Bonds Net Wealth?,"
Journal of Political Economy,
University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
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- Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
- Benassy, Jean-Pascal, 2011. "Macroeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195387711, April.
- Amartya K. Sen, 1967. "Isolation, Assurance and the Social Rate of Discount," The Quarterly Journal of Economics, Oxford University Press, vol. 81(1), pages 112-124. Full references (including those not matched with items on IDEAS)
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