Intergenerational altruism with future bias
Gonzalez,Francisco Lazkano,Itziar Smulders,Sjak
Gonzalez,Francisco
Lazkano,Itziar
Smulders,Sjak
Abstract
We show that standard preferences of altruistic overlapping generations exhibit future bias, which involves preference reversals associated with increasing impatience. This underlies a conflict of interest between successive generations. We explore the implications of this conflict for intergenerational redistribution when there is a sequence of utilitarian governments representing living generations and choosing policies independently over time. We argue that future bias creates incentives to legislate and sustain a pay-as-you-go pension system, which every government views as a self-enforcing commitment mechanism to increase future old-age transfers.
Description
Date
2018-11
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
Intergenerational altruism, Time inconsistency, beta-delta discounting, Overlapping generations, Pay-as-you-go pensions, D71 - Social Choice ; Clubs ; Committees ; Associations, D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior, H55 - Social Security and Public Pensions, SDG 1 - No Poverty
Citation
Gonzalez, F, Lazkano, I & Smulders, S 2018, 'Intergenerational altruism with future bias', Journal of Economic Theory, vol. 178, pp. 436-454. https://doi.org/10.1016/j.jet.2018.10.004