NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Intergenerational Redistribution with Short-Lived Governments

Gene M. Grossman, Elhanan Helpman

NBER Working Paper No. 5447
Issued in January 1996
NBER Program(s):   EFG   PE

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.

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Document Object Identifier (DOI): 10.3386/w5447

Published: Economic Journal, Vol. 108, no. 45 (September 1998): 1299-1325.

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