IDEAS home Printed from https://ideas.repec.org/p/wat/wpaper/1403.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://uwaterloo.ca/economics/sites/ca.economics/files/uploads/files/francisco_gonzalez_wp_1.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002. "Equilibrium Welfare and Government Policy with Quasi-geometric Discounting," Journal of Economic Theory, Elsevier, vol. 105(1), pages 42-72, July.
    2. Blackorby,Charles & Bossert,Walter & Donaldson,David J., 2005. "Population Issues in Social Choice Theory, Welfare Economics, and Ethics," Cambridge Books, Cambridge University Press, number 9780521532587, October.
    3. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    4. 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..
    5. Gilles Saint-Paul, 1992. "Fiscal Policy in an Endogenous Growth Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1243-1259.
    6. Burbidge, John B, 1983. "Government Debt in an Overlapping-Generations Model with Bequests and Gifts," American Economic Review, American Economic Association, vol. 73(1), pages 222-227, March.
    7. Kimball, Miles S., 1987. "Making sense of two-sided altruism," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 301-326, September.
    8. Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1257-1268, December.
    9. B. Douglas Bernheim, 1989. "Intergenerational Altruism, Dynastic Equilibria and Social Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(1), pages 119-128.
    10. Stéphane Zuber, 2011. "The aggregation of preferences: can we ignore the past?," Theory and Decision, Springer, vol. 70(3), pages 367-384, March.
    11. Hori, Hajime, 1997. "Dynamic Allocation in an Altruistic Overlapping Generations Economy," Journal of Economic Theory, Elsevier, vol. 73(2), pages 292-315, April.
    12. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(2), pages 185-199.
    13. Kohlberg, Elon, 1976. "A model of economic growth with altruism between generations," Journal of Economic Theory, Elsevier, vol. 13(1), pages 1-13, August.
    14. Ray, Debraj, 1987. "Nonpaternalistic intergenerational altruism," Journal of Economic Theory, Elsevier, vol. 41(1), pages 112-132, February.
    15. B. Douglas Bernheim & Debraj Ray, 1987. "Economic Growth with Intergenerational Altruism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(2), pages 227-243.
    16. Robert J. Barro, 1999. "Ramsey Meets Laibson in the Neoclassical Growth Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1125-1152.
    17. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    18. Christian Gollier & Richard Zeckhauser, 2005. "Aggregation of Heterogeneous Time Preferences," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 878-896, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gonzalez, Francisco M. & Lazkano, Itziar & Smulders, Sjak A., 2018. "Intergenerational altruism with future bias," Journal of Economic Theory, Elsevier, vol. 178(C), pages 436-454.
    2. Francisco M. Gonzalez & Itziar Lazkano & Sjak A. Smulders, 2015. "Future-biased government," Working Papers 1502, University of Waterloo, Department of Economics, revised Oct 2015.
    3. Francisco M. Gonzalez & Itziar Lazkano & Sjak A. Smulders, 2017. "Future-biased Intergenerational Altruism," Working Papers 1703, University of Waterloo, Department of Economics, revised Apr 2017.
    4. Tamai, Toshiki, 2022. "Economic growth, equilibrium welfare, and public goods provision with intergenerational altruism," European Journal of Political Economy, Elsevier, vol. 71(C).
    5. Tamai, Toshiki, 2023. "The rate of discount on public investments with future bias in an altruistic overlapping generations model," European Journal of Political Economy, Elsevier, vol. 79(C).
    6. Reyer Gerlagh, 2012. "Carbon Prices for the Next Thousand Years," Review of Environment, Energy and Economics - Re3, Fondazione Eni Enrico Mattei, August.
    7. Antony Millner, 2016. "Heterogeneous intergenerational altruism," GRI Working Papers 226, Grantham Research Institute on Climate Change and the Environment.
    8. Antony Millner & Geoffrey Heal, 2015. "Collective intertemporal choice: time consistency vs. time invariance," GRI Working Papers 220, Grantham Research Institute on Climate Change and the Environment.
    9. Balbus, Łukasz & Jaśkiewicz, Anna & Nowak, Andrzej S., 2016. "Non-paternalistic intergenerational altruism revisited," Journal of Mathematical Economics, Elsevier, vol. 63(C), pages 27-33.
    10. Saez-Marti, Maria & Weibull, Jorgen W., 2005. "Discounting and altruism to future decision-makers," Journal of Economic Theory, Elsevier, vol. 122(2), pages 254-266, June.
    11. Robinson, James A. & Srinivasan, T.N., 1993. "Long-term consequences of population growth: Technological change, natural resources, and the environment," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 21, pages 1175-1298, Elsevier.
    12. Hanming Fang & Dan Silverman, 2009. "Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1043-1077, November.
    13. Hiroshi Fujiu, 2021. "Business Cycles in a Two-Sided Altruism Model," Mathematics, MDPI, vol. 9(17), pages 1-12, August.
    14. Dan Cao & Iván Werning, 2018. "Saving and Dissaving With Hyperbolic Discounting," Econometrica, Econometric Society, vol. 86(3), pages 805-857, May.
    15. Terrence Iverson & Larry Karp, 2021. "Carbon Taxes and Climate Commitment with Non-constant Time Preference," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(2), pages 764-799.
    16. Nesje, Frikk, 2020. "Cross-dynastic Intergenerational Altruism," Working Papers 0678, University of Heidelberg, Department of Economics.
    17. Hamada, Kojun & Yanagihara, Mitsuyoshi, 2016. "Intergenerational altruism and the transfer paradox in an overlapping generations model," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 161-167.
    18. Ryoji Ohdoi & Koichi Futagami, 2021. "Welfare implications of non-unitary time discounting," Theory and Decision, Springer, vol. 90(1), pages 85-115, February.
    19. Bach Dong Xuan & Philippe Bich & Bertrand Wigniolle, 2022. "On multiple discount rates and present bias," Working Papers halshs-03884664, HAL.
    20. Drouhin, Nicolas, 2020. "Non-stationary additive utility and time consistency," Journal of Mathematical Economics, Elsevier, vol. 86(C), pages 1-14.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wat:wpaper:1403. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sherri Anne Arsenault (email available below). General contact details of provider: https://edirc.repec.org/data/dewatca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.