IDEAS home Printed from https://ideas.repec.org/p/red/sed006/712.html
   My bibliography  Save this paper

Transfers versus Public Investment: The Politics of Intergenerational Redistribution and Growth

Author

Listed:
  • Martin Gonzalez-Eiras

    (Universidad de San Andres)

  • Dirk Niepelt

Abstract

In this paper we analyze tax and transfer choices in an OLG economy with capital accumulation and endogenous growth coming from public investment, such as education. We solve for a Markov perfect equilibrium when electoral competition targets the votes of young and old households. We find that when calibrating the model to match US data, it predicts levels of intergenerational transfers and of public investments that are similar to the observed ones. Furthermore the Ramsey policy for the same parameters would call for both generations to be taxed to finance public investment. If the political process internalized the benefits that public investment has on future generations, growth would be twice as high as currently observed

Suggested Citation

  • Martin Gonzalez-Eiras & Dirk Niepelt, 2006. "Transfers versus Public Investment: The Politics of Intergenerational Redistribution and Growth," 2006 Meeting Papers 712, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:712
    as

    Download full text from publisher

    File URL: https://www.red-files-public.s3.amazonaws.com/meetpapers/2006/paper_712.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Janice Bell, 2001. "The Political Economy of Reform in Post-Communist Poland," Books, Edward Elgar Publishing, number 1810.
    2. Giorgio Bellettini & Carlotta Berti Ceroni, 1999. "Is Social Security Really Bad for Growth?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 796-819, October.
    3. Antonio Rangel, 2003. "Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?," American Economic Review, American Economic Association, vol. 93(3), pages 813-834, June.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gonzalez-Eiras, Martín & Niepelt, Dirk, 2012. "Ageing, government budgets, retirement, and growth," European Economic Review, Elsevier, vol. 56(1), pages 97-115.
    2. Dirk Niepelt & Martin Gonzalez-Eiras, 2010. "Internal Migrations and Decentralization of Public Investment," 2010 Meeting Papers 737, Society for Economic Dynamics.
    3. Michael Kaganovich & Volker Meier, 2012. "Social Security Systems, Human Capital, and Growth in a Small Open Economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(4), pages 573-600, August.
    4. Francesco Lancia & Alessia Russo, 2010. "A Dynamic Politico-Economic Model of Intergenerational Contracts," Center for Economic Research (RECent) 050, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    5. Iñigo Iturbe-Ormaetxe & Guadalupe Valera, 2012. "Social security reform and the support for public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 609-634, January.
    6. Gianko Michailidis & Concepció Patxot & Meritxell Solé, 2019. "Do pensions foster education? An empirical perspective," Applied Economics, Taylor & Francis Journals, vol. 51(38), pages 4127-4150, August.
    7. 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.
    8. Uchida, Yuki & Ono, Tetsuo, 2022. "Politics of Public Education and Pension Reform with Endogenous Fertility," MPRA Paper 114543, University Library of Munich, Germany.
    9. Francesco Lancia & Alessia Russo, 2010. "A Dynamic Politico-Economic Model of Intergenerational Contracts," Center for Economic Research (RECent) 050, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    10. Michele Boldrin & Ana Montes, 2009. "Assessing the efficiency of public education and pensions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(2), pages 285-309, April.
    11. Tetsuo Ono, 2015. "Public education and social security: a political economy approach," Economics of Governance, Springer, vol. 16(1), pages 1-25, February.
    12. J. Ignacio Conde-Ruiz & Eduardo L. Giménez & Mikel Pérez-Nievas, 2010. "Millian Efficiency with Endogenous Fertility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 154-187.
    13. 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.
    14. Naito, Katsuyuki, 2012. "Two-sided intergenerational transfer policy and economic development: A politico-economic approach," Journal of Economic Dynamics and Control, Elsevier, vol. 36(9), pages 1340-1348.
    15. Tetsuo Ono, 2014. "Economic Growth and the Politics of Intergenerational Redistribution," Discussion Papers in Economics and Business 14-17-Rev., Osaka University, Graduate School of Economics, revised Sep 2015.
    16. Peter J. Stauvermann & Ronald R. Kumar, 2016. "Sustainability of A Pay-as-you-Go Pension System in A Small Open Economy with Ageing, Human Capital and Endogenous Fertility," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 2-20, February.
    17. Bishnu, Monisankar & Garg, Shresth & Garg, Tishara & Ray, Tridip, 2021. "Optimal intergenerational transfers: Public education and pensions," Journal of Public Economics, Elsevier, vol. 198(C).
    18. Zamac, Jovan, 2007. "Pension design when fertility fluctuates: The role of education and capital mobility," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 619-639, April.
    19. Marco Bassetto, 2008. "Political Economy of Taxation in an Overlapping-Generations Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 18-43, January.
    20. 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.

    More about this item

    Keywords

    endogenous growth; intergenerational transfers; education; probabilistic voting; Markov perfect equilibrium;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

    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:red:sed006:712. See general information about how to correct material in RePEc.

    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 bibliographic 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.