Generational Accounts, Aggregate Saving and Intergenerational Distribution / Willem H. Buiter.

Format:

Book

Author/Creator:

Buiter, Willem H.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5087.

NBER working paper series no. w5087

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

Are generational accounts informative about the effect of the budget on the intergenerational distribution of resources and (when augmented with generation-specific propensities to consume out of life-time resources) on aggregate consumption and saving? The paper makes three points. First, the usefulness of generational accounts lives or dies with the strict life-cycle model of household consumption. Voluntary intergenerational gifts or liquidity constraints may therefore adversely affect or even destroy their informativeness. Second, even when the life-cycle model holds, generational accounts only measure the effect of the budget on the lifetime consumption of private goods and services. They ignore the intergenerational (re-)distribution associated with the government's provision of public goods and services. Third, generational accounting ignores the effect of the budget on before-tax and before-transfer quantities and prices, including before-tax and -transfer distribution of life-time resources across generations and intertemporal relative prices. That is, it does not handle incidence or general equilibrium repercussions very well. Although useful, generational accounts should therefore carry the label 'handle with great care.'

Notes:

Print version record

April 1995.