Intergenerational Redistribution with Short-Lived Governments

47 Pages Posted: 15 Sep 2000 Last revised: 21 Mar 2008

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: January 1996

Abstract

We study the politics of intergenerational redistribution in an overlapping generations model with short-lived governments. The successive governmentsþwho care about the welfare of the currently living generations and possibly about campaign contributionsþare unable to pre-commit the future course of redistributive taxation. In a stationary politico-economic equilibrium, the tax rate in each period depends on the current value of the state variable and all expectations about future political outcomes are fulfilled. We 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.

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan, Intergenerational Redistribution with Short-Lived Governments (January 1996). NBER Working Paper No. w5447. Available at SSRN: https://ssrn.com/abstract=225504

Gene M. Grossman (Contact Author)

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

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Elhanan Helpman

Harvard University - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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