TY  - JOUR
AU  - Buiter,Willem H.
AU  - Kletzer,Kenneth M.
TI  - The Welfare Economics of Cooperative and Noncooperative Fiscal Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3329
PY  - 1991
Y2  - February 1991
UR  - http://www.nber.org/papers/w3329
L1  - http://www.nber.org/papers/w3329.pdf
N1  - Author contact info:
Willem H. Buiter
Citigroup Centre
Canada Square, Canary Wharf
London E14 5LB
UNITED KINGDOM
E-Mail: willembuiter@btinternet.com

Kenneth Kletzer
University of California, Santa Cruz
Department of Economics
217 Social Sciences 1
Santa Cruz, CA  95064
Tel: 408-459-3407
E-Mail: kkletzer@cats.ucsc.edu
AB  - In a competitive two-country overlapping generations model with perfect capital mobility, a plan that is individually Pareto optimal (that is Pareto optimal with respect to individual preferences) can be sustained without coordination of national fiscal policies when the fiscal arsenal is restricted to lump-sum taxes and government borrowing. Cooperation is required to achieve a Pareto optimum with respect to the two utilitarian national social welfare functions. Cooperation and international side payments are required to achieve an optimum with respect to a utilitarian global social welfare function. Without international lump-sum transfers, when distortionary taxes on capital income are permitted, Pareto optima with respect to national social welfare functions and global social welfare optima will not be individual Pareto optima: efficiency is traded off for a more desirable intergenerational and international distribution of resources. With nationally provided international public goods, the achievement of individual Pareto efficiency requires coordination of public spending but not of financing.
ER  -