Intergenerational Transfers, Lifetime Welfare and Resource Preservation

Abstract

This paper studies the welfare properties of distortionary transfers in a life-cycle growth model where natural capital is private property. The main result is that, under credible pre-commitment, each newborn generation prefers positive taxes-subsidies to laissez-faire conditions when the resource share in production is sufficiently high. By increasing the degree of natural preservation, resource-saving policies raise welfare of all generations except that of the first resource owner, who suffers a deadweight loss due to taxation of the initial stock. If the first owner renounces part of his claims over initial endowments, all successive generations support resource-saving policies for purely selfish reasons.Distortionary Taxation, Intergenerational Transfers, Overlapping Generations, Renewable Resources, Sustainability.