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Intergenerational Redistribution with Short-Lived Governments

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Author Info
Grossman, Gene M
Helpman, Elhanan

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Abstract

The authors study the politics of intergenerational redistribution in an overlapping generations model with short-lived governments. The successive governments--who care about the welfare of the currently living generations and possibly about campaign contributions--are unable to precommit the future course of redistributive taxation. In a stationary politico-economic equilibrium, the intergenerational transfer in each period depends on the current value of the state variable and all expectations about future political outcomes are fulfilled. The authors find that there exist multiple stationary equilibria in many political settings. Steady-state welfare is often lower than it would be in the absence of redistributive politics.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 108 (1998)
Issue (Month): 450 (September)
Pages: 1299-1329
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Handle: RePEc:ecj:econjl:v:108:y:1998:i:450:p:1299-1329

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
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  2. Leininger, Wolfgang, 1986. "The Existence of Perfect Equilibria in a Model of Growth with Altruism between Generations," Review of Economic Studies, Blackwell Publishing, vol. 53(3), pages 349-67, July. [Downloadable!] (restricted)
  3. Breyer, Friedrich, 1994. "The political economy of intergenerational redistribution," European Journal of Political Economy, Elsevier, vol. 10(1), pages 61-84, May. [Downloadable!] (restricted)
  4. Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Blackwell Publishing, vol. 63(2), pages 265-86, April. [Downloadable!] (restricted)
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  6. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January. [Downloadable!] (restricted)
  7. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June. [Downloadable!] (restricted)
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  8. Boadway, Robin W & Wildasin, David E, 1989. "A Median Voter Model of Social Security," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 307-28, May. [Downloadable!] (restricted)
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  9. Harrie Verbon & Marijn Verhoeven, 1992. "Decision making on pension schemes under rational expectations," Journal of Economics, Springer, vol. 56(1), pages 71-97, February. [Downloadable!] (restricted)
  10. Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August. [Downloadable!] (restricted)
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  11. Bernheim, B. Douglas & Ray, Debraj, 1989. "Markov perfect equilibria in altruistic growth economies with production uncertainty," Journal of Economic Theory, Elsevier, vol. 47(1), pages 195-202, February. [Downloadable!] (restricted)
  12. Dixit, Avinash K & Londregan, John, 1994. "The Determinants of Success of Special Interests in Redistributive Politics," CEPR Discussion Papers 1054, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June. [Downloadable!] (restricted)
  14. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring. [Downloadable!] (restricted)
  15. Tabellini, Guido, 1991. "The Politics of Intergenerational Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 335-57, April. [Downloadable!] (restricted)
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  16. Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Oxford University Press, vol. 13(3), pages 373-88, September.
  17. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bernard M.S. van Praag & Pedro Cardoso, 2003. "The Mix Between Pay-as-you-go and Funded Pensions and What Demography Has to Do with it," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "Positive Arithmetic of the Welfare State," Working Papers 2003-04, FEDEA. [Downloadable!]
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  3. Martín Gonzalez-Eiras & Dirk Niepelt, 2005. "Sustaining Social Security," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  4. Jean-Pierre Laffargue, 2009. "Intergenerational transfers and the stability of public debt with short-lived governments," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00270503_v1, HAL. [Downloadable!]
  5. Per Krusell & Jose-Victor Rios-Rull, 1999. "On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model," American Economic Review, American Economic Association, vol. 89(5), pages 1156-1181, December. [Downloadable!] (restricted)
    Other versions:
  6. Hans Gersbach & Lars Siemers, 2005. "Can Democracy Educate a Society?," IZA Discussion Papers 1693, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Giorgio Bellettini & Gianmarco I.P. Ottaviano, 2003. "Special Interests and Technological Change," Working Papers 2003.59, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  8. Martín Gonzales-Eiras & Dirk Niepelt, 2007. "Population Ageing, Government Budgets, and Productivity Growth in Politico-Economic Equilibrium," Working Papers 07.05, Swiss National Bank, Study Center Gerzensee. [Downloadable!]
    Other versions:
  9. Ryo Arawatari & Tetsuo Ono, 2008. "Aging, Inequality and Social Security," Discussion Papers in Economics and Business 08-19, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  10. Uk Hwang & Francesco Magris, 2005. "Intergenerational Conflicts and the Resource Policy Formation of a Short-Lived Government," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(III), pages 437-457, September. [Downloadable!]
  11. Strulik, H., 1999. "Fiscal Policy Reforms in a Global Economy," Electronic-Only (EO) Working Papers 9902, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  12. Sita Nataraj Slavov, 2001. "Age Bias in Fiscal Policy: Why Does the Political Process Favor the Elderly?," Occidental Economics Working Papers 1, Occidental College, Department of Economics, revised Jan 2006. [Downloadable!]
  13. Ryo Arawatari & Tetsuo Ono, 2008. "A Second Chance at Success: A Political Economy Perspective?," Discussion Papers in Economics and Business 08-04, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
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  14. Lars-Erik Borge & Jørn Rattsø, 2007. "Young and old competing for public welfare services," Working Paper Series 8607, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
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  15. repec:bep:thetop:v:6:y:2006:i:1:p:1279-1279 is not listed on IDEAS
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  16. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, 2006. "Early Retirement and Social Security: A Long Term Perspective," CSEF Working Papers 165, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
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  17. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Abrizio Zilibotti, 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March. [Downloadable!]
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  18. Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January. [Downloadable!] (restricted)
  19. Roland Benabou, 1996. "Unequal Societies," NBER Working Papers 5583, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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