Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem

Laurence Kotlikoff, Torsten Persson () and Lars Svensson

American Economic Review, 1988, vol. 78, issue 4, 662-77

Abstract: The authors present a new solution to the time-consistency problem that appears capable of enforcing ex ante policy i n settings where other enforcement mechanisms do not work. The soluti on involves a social contract that specifies the optimal ex ante poli cy and is effectively sold by successive old generations to successiv e young generations, who pay for the social contract through intergen erational transfers. Both old and young generations have an economic incentive to fulfill the social contract. The authors apply the solut ion to show how an equilibrium without excessive capital taxation can be enforced, despite an ongoing temptation to impose ex post capital levies. Copyright 1988 by American Economic Association.

Date: 1988
References: Add references at CitEc
Citations: View citations in EconPapers (98)

Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819880 ... O%3B2-6&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:78:y:1988:i:4:p:662-77

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().