Gifts, Bequests and Growth

A familiar result in the theory of private intergenerational transfers is that competitive equilibria with gifts from children to their parents are dynamically inefficient whereas they are dynamically efficient with bequests from parents to their children. This note demonstrates that if growth is endogenous, both gift and bequest economies are dynamically efficient, but gift economies grow more rapidly.Altruism, Dynamic Efficiency, Endogenous Growth

Pareto-improving intergenerational transfers

In the presence of endogenous growth intergenerational transfer from the young to the old reduce per capita income growth and harm future generations. On the other hand, competitive equilibria are inefficient if externalities sustain long-run growth. This paper shows that if individuals retire in the last period of their life, the inefficiency of the market economy can be removed by an investment subsidy without making the current or future generations worse off only if coupled with intergenerational transfers from the young to the old.Intergenerational transfers, Externalities, Endogenous growth

Alterssicherung und Wachstum

Der vorliegende Beitrag untersucht die kurz- und langfristigen Effekte der umlagefinanzierten Rentenversicherung auf das Produktivitätswachstum und diskutiert die Möglichkeit einer Pareto-verbessernden Reform. Es wird gezeigt, daß eine Reduktion der dem Umlageverfahren innewohnenden intergenerationellen Transfers nicht Pareto-verbessernd ist. Sie ist es selbst dann nicht, wenn geringere intergenerationelle Transfers das Produktivitätswachstum dauerhaft erhöhen. Eine Pareto-verbessernde Reform ist gleichwohl möglich. Sie besteht darin, die Altersrenten als Sparprämien statt pauschal auszuzahlen

Trade Union Objectives and Economic Growth

A trade union whose purpose is to raise wages above the competitive level may foster economic growth if it succeeds in shifting income away from the owners of capital to the workers and if the workers' marginal propensity to save exceeds the one of capitalists. We make this point in an overlapping generations framework with unionized labor. Considering a monopoly union which cares for wages and employment, we determine a range of trade union objectives and characterize the aggregate technology so that the union's policy spurs per capita income growth and increases welfare of all generations that adhere to the union.Trade union; Overlapping generations; Factor shares; Endogenous technical change; Employment

Expert Politicians, Electoral Control, and Fiscal Restraints

Fiscal restraints have been argued to force today’s governments to internalize the externalities that result from extensive borrowing on future electorates and governments as well as on other countries by causing fiscal instability. In this article we provide an alternative argument for fiscal restraints which is based on an agency perspective on government. A budget maximizing politician is better informed than the electorate about the necessary spending to ensure the states ability to provide services for the economy. In this respect, the politician is an expert in the meaning of the credence good literature. The electorate, being able to observe the budget but not the necessary level of spending, will reelect a government if its budget does not exceed a critical level. A fiscal restraint limits the maximum spending a government will choose if the reelection level is not sufficient to ensure the state’s ability to provide services to the economy. We determine when such a fiscal restraint improves voter welfare and discuss the role of the opposition in situations where very high levels of spending are required.electoral control, fiscal restraints, credence goods

Tuition fees had no negative effect on participation in higher education in Germany

Following political opposition, all German states have abolished university tuition fees, which were originally implemented in the mid-2000s. Berthold U. Wigger outlines the findings of research on the effect tuition fees had on enrolment levels in German universities. He writes that contrary to expectations, tuition fees did not have an identifiable negative effect on enrolment levels within Germany. He argues that the German experience shows tuition fees will not necessarily deter potential students if they are set at a relatively low level, are combined with an effective student loans programme, and if exemptions are provided to students matching certain social criteria, such as low incomes

Trade Union Objectives and Economic Growth

A trade union whose purpose is to raise wages above the competitive level may foster economic growth if it succeeds in shifting income away from the owners of capital to the workers and if the workers' marginal propensity to save exceeds the one of capitalists. We make this point in an overlapping generations framework with unionized labor. Considering a monopoly union which cares for wages and employment, we determine a range of trade union objectives and characterize the aggregate technology so that the union's policy spurs per capita income growth and increases welfare of all generations that adhere to the union.Trade union, overlapping generations, factor shares, endogenous technical change, employment

Growth and Social Security: The Role of Human Capital

This paper studies the growth and efficiency effects of pay-as-you-go financed social security when human capital is the engine of growth. Employing a variant of the Lucas (1988) model with overlapping generations, it is shown that a properly designed unfunded social security system leads to higher output growth than a fully funded one. Furthermore, the economy with unfunded social security is efficient while the other one is not. These results stand in sharp contrast to those that obtain in models where economic growth is driven by physical capital accumulation.Endogenous Growth, Social Security, Human Capital

Brauchen wir IPCEI? [Do We Need IPCEI?]

Ein Important Project of Common European Interest (IPCEI) ist ein staatliches Förderprogramm in der EU, in dessen Rahmen die teilnehmenden Mitgliedstaaten mit eigenen Mitteln Forschung und Innovation privater Unternehmen in den eigenen Grenzen unterstützen können. Die zentrale Frage, die sich im Zusammenhang mit der Einrichtung oder Ausdehnung eines IPCEI stellt, ist, inwieweit damit zu einem besseren Innovationsklima beigetragen werden kann

On the Intergenerational Incidence of Wage and Consumption Taxes

This paper analyzes the intergenerational incidence of wage and consumption taxes imposed to finance a given amount of public expenditures. It employs a continuous time overlapping genera-tions framework to demonstrate that it essentially hinges on the relationship between the age-earnings and age-consumption profiles of the households which generations bear the major burden of wage respectively consumption taxes. Furthermore, the paper points to some political economy implications of the incidence of wage and consumption taxes.Intergenerational incidence, wage and consumption taxes, life cycle model