TY  - JOUR
AU  - Abel,Andrew B.
AU  - Bernheim,B. Douglas
TI  - Fiscal Policy With Impure Intergenerational Altruism
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2613
PY  - 1992
Y2  - January 1992
UR  - http://www.nber.org/papers/w2613
L1  - http://www.nber.org/papers/w2613.pdf
N1  - Author contact info:
Andrew B. Abel
Wharton School
University of Pennsylvania
2315 Steinberg Hall - Dietrich Hall
Philadelphia, PA  19104-6367
Tel: 215/898-4801
Fax: 215/573-7244
E-Mail: abel@wharton.upenn.edu

B. Douglas Bernheim
Department of Economics
Stanford University
Stanford, CA 94305-6072
Tel: 650/725-8732
Fax: 650/725-5702
E-Mail: bernheim@stanford.edu
AB  - Recent work demonstrates that dynastic assumptions guarantee the irrelevance of all redistributional polices, distortionary taxes, and prices--the neutrality of fiscal policy (Ricardian equivalence) is only the "tip of the iceberg." In this paper, we investigate the possibility of reinstating approximate Ricardian equivalence. by introducing a small amount of friction in intergenerational links. If Ricardian equivalence depends upon significantly shorter chains of links than do these stronger neutrality results, then friction my dissipate the effects that generate strong neutrality, without significantly affecting the Ricardian result. Although this intuition turns out to be essentially correct, we show that models with small amounts of friction have other untenable implications. We conclude that the theoretical case for Ricardian equivalence remains tenuous.
ER  -