 The Dutch disease and intergenerational welfareApplied Economics, 2013, vol. 45, issue 4, 465-476 Abstract: Governments in resource abundant economies face a tradeoff between transferring wealth to present generations and saving for future generations. Employing an overlapping generations framework with endogenous growth, this article analyses the intergenerational welfare effects of: (1) a wealth transfer policy where the entire wealth is transferred to the generations alive at present; (2) an income transfer policy where the wealth is saved and the permanent income of the wealth is transferred to all present and future generations, forever. Not surprisingly, present generations are unambiguously better off with the wealth transfer policy. Less trivially, however, the wealth transfer policy can be associated with higher welfare also for future generations. The intuition for this result is that while a wealth transfer depresses growth only in the periods subsequent to the transfer, income transfers constitute a permanent drag on growth. Perhaps counter to the naïve intuition, the policy of saving the wealth and distributing the permanent income to all present and future generations is less beneficial for the future generations if the real return to saving is high. Date: 2013 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:45:y:2013:i:4:p:465-476 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2011.605762 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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