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SOME INEFFICIENCY IMPLICATIONS OF GENERATIONAL POLITICS AND EXCHANGE *
Author(s) -
KOTLIKOFF LAURENCE J.,
ROSENTHAL ROBERT W.
Publication year - 1993
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.1468-0343.1993.tb00065.x
Subject(s) - inefficiency , politics , political science , political economy , economics , market economy , law
This paper explores the implications of generational selfishness in a model in which each generation has its own government. Such selfish generational governments will potentially distort the economy along a number of dimensions. One is the monopolization of factor supplies; another is the under‐ or overprovision of durable public goods. We demonstrate that selfish generations may place sizable marginal taxes on their factor supplies in order to monopolize their factor markets. We also show that selfish generations will provide inefficient levels of durable public goods both at the local and national levels. Finally, we demonstrate that generational inefficiencies can arise even in models of cooperative bargaining because of the first‐mover advantage of earlier generations.