TY  - JOUR
AU  - Rangel,Antonio
TI  - Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7518
PY  - 2000
Y2  - February 2000
UR  - http://www.nber.org/papers/w7518
L1  - http://www.nber.org/papers/w7518.pdf
N1  - Author contact info:
Antonio Rangel
Department of Economics
California Institute of Technology
HSS MC 228-77
Pasadena, CA 91125
Tel: (626) 395-4091
E-Mail: rangel@hss.caltech.edu
AB  - 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.
ER  -