Some Inefficiency Implication of Generational Politics and Exchange
25 Pages Posted: 4 Aug 2000 Last revised: 2 Sep 2022
Date Written: May 1990
Abstract
Generational selfishness is a central assumption in the vast literature on the life cycle model. Much of this literature deals with the impact of alternative government policies in light of self-interested generational behavior. Surprisingly, the choices of governments in virtually all of these analyses are assumed to be independent of the preferences of the selfish generations these governments presumably represent. We address this anomaly by modeling each generation as having a government that strictly represents the economy along a number of dimensions. We consider two types of inefficiencies that have received little or no attention in the literature. The first is the monopolization of factor supplies, and the second is the under- or overprovision of durable public goods. We demonstrate that selfish generations may place sizable marginal taxes on their factor supplies in order to monopolize their factor markets. We also show that selfish generations will provide inefficient levels of durable public goods both at the local and national levels. Finally, we demonstrate that generational inefficiencies can arise even in models of cooperative bargaining because of the first-mover advantage of earlier generations.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Intergenerational State: Education and Pensions
By Michele Boldrin and Ana Montes
-
Laws as Assets: a Possible Solution to the Time Consistency Problem
By Laurence J. Kotlikoff, Torsten Persson, ...
-
Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange
-
Lending with Costly Enforcement of Repayment and Potential Fraud
-
Gerontocracy Revisited: Unilateral Transfer to the Young May Benefit the Middle-Aged
-
Unraveling the Nash Bargaining Theory
By Hak Choi
-
Intergenerational Transfers, Lifetime Welfare and Resource Preservation
-
By Hak Choi
-
Solving the Nash Bargaining Problem
By Hak Choi