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Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange

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  • Antonio Rangel

Abstract

December 1999 This papers develops a theory of intergenerational exchange for generations that are either selfish or have non-dynastic altruism. The main building blocks of the theory are forward and backward intergenerational goods (FIGs and BIGs) and the relationship between them. A FIG is a transfer from present to future generations, like parental investments in education and the preservation of the environment. A BIG is a transfer from future to present generations, like pay-as-you-go social security or taking care of elderly parents. We show that there is a fundamental difference between BIGs and FIGs. BIGs generating a positive surplus are self-sustainable, but FIGs never are. However, even with selfish generations, optimal investment in future generations can take place if the equilibrium social norm links BIGs and FIGs. The tools developed here can be used to understand a wide class of intergenerational problems, from the political economy of environmental treaties to the economics of seniority institutions. Two applications are developed in the paper: (1) the political economy of intergenerational public expenditures, and (2) investment in children within the family. JEL codes: H0, H3, H4, I2, D1, D7, C7, E6

Suggested Citation

  • Antonio Rangel, 1999. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," Working Papers 00001, Stanford University, Department of Economics.
    • Handle: RePEc:wop:stanec:00001
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    File URL: http://www-econ.stanford.edu/faculty/workp/swp00001.pdf
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    Cited by:

    1. Cigno, A., 2016. "Conflict and Cooperation Within the Family, and Between the State and the Family, in the Provision of Old-Age Security," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 609-660, Elsevier.
    2. Antoine Bommier & Ronald Lee & Tim Miller & Stéphane Zuber, 2010. "Who Wins and Who Loses? Public Transfer Accounts for US Generations Born 1850 to 2090," Population and Development Review, The Population Council, Inc., vol. 36(1), pages 1-26, March.
    3. Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 651-664.
    4. Banerjee, Abhijit V., 2004. "Educational policy and the economics of the family," Journal of Development Economics, Elsevier, vol. 74(1), pages 3-32, June.
    5. Andreas Wagener, 2002. "Intergenerational Transfer Schemes as Incomplete Social Contracts," Constitutional Political Economy, Springer, vol. 13(4), pages 337-359, December.
    6. P. Kiss, Gábor, 2002. "A fiskális jelzőszámok új megközelítésben [A new approach to fiscal index numbers]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 292-319.
    7. Kent Smetters, 2001. "The Equivalence of the Social Security's Trust Fund Portfolio Allocation and Capital Income Tax Policy," NBER Working Papers 8259, National Bureau of Economic Research, Inc.
    8. Poutvaara, Panu, 2004. "Gerontocracy revisited: unilateral transfer to the young may benefit the middle-aged," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 161-174, January.
    9. Panu Poutvaara, 2006. "On the political economy of social security and public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 345-365, June.
    10. Findeis, Jill L., 2002. "Subjective Equilibrium Theory of the Farm Household: Theory Revisited and New Directions," Workshop on the Farm Household-Firm Unit: Its Importance in Agriculture and Implications for Statistics, April 12-13,2002, Wye Campus, Imperial College 15723, International Agricultural Policy Reform and Adjustment Project (IAPRAP).

    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H4 - Public Economics - - Publicly Provided Goods
    • I2 - Health, Education, and Welfare - - Education
    • D1 - Microeconomics - - Household Behavior
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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