Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange

Antonio Rangel

NBER Working Paper No. 7518
Issued in February 2000
NBER Program(s):   AG   PE

This paper develops a theory of intergenerational exchange for generations that are either selfish or have non-dynastic altruism. The main building blocks of the theory are forward and backward intergenerational goods (FIGs and BIGs) and the relationship between them. A FIG is a transfer from present to future generations, like parental investments in education and the preservation of the environment. A BIG is a transfer from future to present generations, like pay-as -you-go social security or taking care of elderly parents. We show that there is a fundamental difference between BIGs and FIGs. BIGs generating a positive surplus are self-sustainable, but FIGs never are. However, even with selfish generations, optimal investment in future generations can take place if the equilibrium social norm links BIGs and FIGs. The tools developed here can be used to understand a wide class of intergenerational problems, from the political economy of environmental treaties to the economics of seniority institutions. Two applications are developed in the paper: (1) the political economy of intergenerational public expenditures, and (2) investment in children within the family.

download in pdf format
   (3036 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7518

Published: Rangel, Antonio. "Forward And Backward Intergenerational Goods: Why Is Social Security Good For The Environment?," American Economic Review, 2003, v93(3,Jun), 813-824.

Users who downloaded this paper also downloaded these:
Conley and Rangel w8394 Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism
Rangel and Zeckhauser Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?
Mason, Lee, Tung, Lai, and Miller w12770 Population Aging and Intergenerational Transfers: Introducing Age into National Accounts
Rangel and Zeckhauser w6949 Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?
Guthrie, Orcutt, and Peabody Microanalytic Simulation of Household Behavior
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us