Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange / Antonio Rangel.

Format:

Book

Author/Creator:

Rangel, Antonio.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7518.

NBER working paper series no. w7518

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Forward and Backward Intergenerational Goods

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

This paper 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.

Notes:

Print version record

February 2000.