Future-biased Intergenerational Altruism

Francisco Gonzalez (), Itziar Lazkano and Sjak Smulders ()

No 1703, Working Papers from University of Waterloo, Department of Economics

Abstract: We show that intergenerational altruism suffers from future bias if generations overlap and people?s altruism concerns the well-being of immediate ancestors and descendants. Future bias involves preference reversals associated with increasing impatience, which can create a con?flict of interest between current and future governments representing living generations. We explore the implications of this con?flict for intergenerational redistribution when there is a sequence of utilitarian governments choosing policies independently over time. We show that future-biased governments can have an incentive to legislate and sustain a pay-as-you-go pension system, which can be understood, from the viewpoint of every government, as a self-enforcing commitment mechanism to increase future old-age transfers.

JEL-codes: D71 D72 H55 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2017-04, Revised 2017-04
New Economics Papers: this item is included in nep-age, nep-dcm, nep-dge and nep-ene
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Persistent link: https://EconPapers.repec.org/RePEc:wat:wpaper:1703

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