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Some Inefficiency Implications Of Generational Politics And Exchange

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  • LAURENCE J. KOTLIKOFF
  • ROBERT W. ROSENTHAL

Abstract

This paper explores the implications of generational selfishness in a model in which each generation has its own government. Such selfish generational governments will potentially distort the economy along a number of dimensions. One is the monopolization of factor supplies; another 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.

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  • Laurence J. Kotlikoff & Robert W. Rosenthal, 1993. "Some Inefficiency Implications Of Generational Politics And Exchange," Economics and Politics, Wiley Blackwell, vol. 5(1), pages 27-42, March.
    • Handle: RePEc:bla:ecopol:v:5:y:1993:i:1:p:27-42
    DOI: 10.1111/j.1468-0343.1993.tb00065.x
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    Cited by:

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    2. , & Gonzalez-Eiras, Martin, 2016. "Fiscal Federalism, Taxation and Grants," CEPR Discussion Papers 11482, C.E.P.R. Discussion Papers.
    3. John P. Conley & Robert Driskill & Ping Wang, 2019. "Capitalization, decentralization, and intergenerational spillovers in a Tiebout economy with a durable public good," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(1), pages 1-27, February.
    4. Glazer, Amihai & Kanniainen, Vesa & Niskanen, Esko, 2003. "Bequests, control rights, and cost-benefit analysis," European Journal of Political Economy, Elsevier, vol. 19(1), pages 71-82, March.
    5. Martin Gonzalez-Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," 2004 Meeting Papers 199, Society for Economic Dynamics.
    6. Antonio Rangel, 1999. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," Working Papers 00001, Stanford University, Department of Economics.
    7. Cellarier, Laurent L., 2013. "A family production overlapping generations economy," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2168-2179.
    8. Arnaud Goussebaïle, 2022. "Democratic Climate Policies with Overlapping Generations," CER-ETH Economics working paper series 22/374, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    9. Gonzalez-Eiras, Martín & Niepelt, Dirk, 2020. "Dynamic tax externalities and the U.S. fiscal transformation," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 144-158.
    10. M. Magnani, 2005. "Labour market regulation and retirement age," Economics Department Working Papers 2005-EP02, Department of Economics, Parma University (Italy).
    11. Antonio Rangel, 2002. "How to Protect Future Generations Using Tax Base Restrictions," NBER Working Papers 9179, National Bureau of Economic Research, Inc.
    12. Antonio Rangel, 2005. "How to Protect Future Generations Using Tax-Base Restrictions," American Economic Review, American Economic Association, vol. 95(1), pages 314-346, March.

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