Altruism, Deficit Policies, and the Wealth of Future Generations

William Lord and Peter Rangazas

Economic Inquiry, 1993, vol. 31, issue 4, 609-30

Abstract: Available evidence suggests that the generations of most families are linked by altruistic human capital investment, rather than by altruistic financial transfers. What is the consequence of this distinction for the Ricardian Equivalence Theorem? The authors use a realistically calibrated overlapping generations model to show that, despite the presence of altruistic human capital transfers, deficit policies are likely to reduce the after-tax wealth of future generations. Furthermore, the majority of households in the current-period population would vote in favor of a deficit-financed tax cut. Copyright 1993 by Oxford University Press.

Date: 1993
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