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Second-best national saving and growth with intergenerational disagreement

Author

Listed:
  • Francisco M. Gonzalez

    (Department of Economics, University of Waterloo)

  • Itziar Lazkano

    (Department of Economics, University of Wisconsin-Milwaukee)

  • Sjak A. Smulders

    (Department of Economics, Tilburg University)

Abstract

We illustrate the contrast between two sources of intergenerational disagreement when generations are overlapping and governments aggregate preferences in a utilitarian manner. Social preferences tend to exhibit a present-bias because generations are imperfectly altruistic about future generations; but they tend to exhibit a future-bias because coexisting generations are imperfectly altruistic about currently older generations. When the future-bias dominates, society faces an intergenerational equity problem, in which case the present-day government tends to support institutions that enable commitments to lower growth at the expense of future generations. This is so even with perfect altruism about future generations.

Suggested Citation

  • Francisco M. Gonzalez & Itziar Lazkano & Sjak A. Smulders, 2014. "Second-best national saving and growth with intergenerational disagreement," Working Papers 1403, University of Waterloo, Department of Economics, revised Mar 2014.
    • Handle: RePEc:wat:wpaper:1403
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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