Generational Accounting and Intergenerational Welfare

Bernd Raffelhuschen and Alf Erling Risa

Public Choice, 1997, vol. 93, issue 1-2, 149-63

Abstract: The authors investigate the intergenerational welfare implications of generational accounting when it is used as the basis for intertemporal fiscal policy decisions. In particular, they consider an economy with a PAYGO social security system out of steady state due to a permanent fall in fertility. In a highly stylized CGE overlapping generations model, the authors illustrate that policy recommendations based on a standard application of generational accounting may not be compatible with intertemporal welfare maximizations. Their model provides an example where such policies are either time inconsistent or welfare-decreasing. Copyright 1997 by Kluwer Academic Publishers

Date: 1997
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