Generational accounting and intergenerational welfare |
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Authors: | Raffelhüschen Bernd Risa Alf Erling |
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Affiliation: | 1.Institut für Finanzwissenschaft, Albert-Ludwigs-Universit?t Freiburg, D-79085, Freiburg, Germany ; |
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Abstract: | We investigate the intergenerational welfare implications of Generational Accounting when it is used as the basis for intertemporal fiscal policy decisions. In particular, we 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 we illustrate that policy recommendations based on a standard application of Generational Accounting may not be compatible with intertemporal welfare maximization. Our model provides an example where such policies are either time inconsistent or welfare-decreasing. |
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