Solution Concept for Intergenerational Conflict: the Role of Intergenerational Bargaining

Yusuke Kinai ()
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Yusuke Kinai: Graduate School of Economics, Osaka University

No 11-10, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper specifically examines intergenerational conflict and analyzes an overlapping generations model of public goods provision from the viewpoint of time-consistency. Public goods are financed through labor-income and capital-income taxation, thereby distorting savings and the labor supply. Taxes redistribute income across generations in the form of public goods. Under such a situation, there emerge dual intergenerational conflicts: the first is related to the amount of public goods and the second is the tax burden. We then contrast the politico-economic equilibrium with commitment allocation, and analyze the sources of conflict and time-inconsistency, and attempt to resolve such a conflict by introducing the concept of eintergenerational bargaining f. Our main findings are the following. First, taxation derived using Lagrange method fails to be time-consistent. Second, depending on bargainingpower, taxation based on intergenerational bargaining can be time-consistent. Third, we portray the properties of taxation and public goods provision rules based on intergenerational bargaining.

Keywords: Dual Intergenerational Conflicts; Intergenerational Bargaining; Time-inconsistency; Modified Public Goods Provision Rule. (search for similar items in EconPapers)
JEL-codes: E61 E62 H41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011-03
New Economics Papers: this item is included in nep-dge and nep-mac
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