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, pages 42-72.
    2. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    3. 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..
    4. Gilles Saint-Paul, 1992. "Fiscal Policy in an Endogenous Growth Model," The Quarterly Journal of Economics, Oxford University Press, pages 1243-1259.
    5. Burbidge, John B, 1983. "Government Debt in an Overlapping-Generations Model with Bequests and Gifts," American Economic Review, American Economic Association, pages 222-227.
    6. Kimball, Miles S., 1987. "Making sense of two-sided altruism," Journal of Monetary Economics, Elsevier, pages 301-326.
    7. Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, pages 1257-1268.
    8. B. Douglas Bernheim, 1989. "Intergenerational Altruism, Dynastic Equilibria and Social Welfare," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 119-128.
    9. Stéphane Zuber, 2011. "The aggregation of preferences: can we ignore the past?," Theory and Decision, Springer, pages 367-384.
    10. Hori, Hajime, 1997. "Dynamic Allocation in an Altruistic Overlapping Generations Economy," Journal of Economic Theory, Elsevier, vol. 73(2), pages 292-315, April.
    11. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 185-199.
    12. Kohlberg, Elon, 1976. "A model of economic growth with altruism between generations," Journal of Economic Theory, Elsevier, vol. 13(1), pages 1-13, August.
    13. Ray, Debraj, 1987. "Nonpaternalistic intergenerational altruism," Journal of Economic Theory, Elsevier, vol. 41(1), pages 112-132, February.
    14. B. Douglas Bernheim & Debraj Ray, 1987. "Economic Growth with Intergenerational Altruism," Review of Economic Studies, Oxford University Press, vol. 54(2), pages 227-243.
    15. Robert J. Barro, 1999. "Ramsey Meets Laibson in the Neoclassical Growth Model," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1125-1152.
    16. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    17. 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)

    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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Pat Gruber). General contact details of provider: http://edirc.repec.org/data/dewatca.html .

    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 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 profile, as there may be some citations waiting for confirmation.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.