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Economic growth, equilibrium welfare, and public goods provision with intergenerational altruism

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  • Tamai, Toshiki
Abstract
This study examines the government policy of public goods provision and its effects on economic growth and welfare under intergenerational altruism. The study considers an endogenous growth model with altruistic overlapping generations. The preferences of the current youth exhibit a future bias, and thus, democratically elected governments are subject to this future bias. The optimal rule for the supply of public goods under future bias differs from the original Samuelson rule. Unlike the standard growth model without any bias, under the optimal rule, the equilibrium growth rate is not independent of government size. Future bias gives young generations the dynamic incentives to invest more. With future bias, the intergenerational redistributive effects of public goods stimulate such incentives under certain conditions. Hence, the government size affects the economic growth through intertemporal changes in their resource allocations. Moreover, the growth effect of the government size provides nontrivial outcomes of welfare analysis. Our numerical analyses show the growth and welfare superiority of the democratic governments to the nonbiased social planner.

Suggested Citation

  • Tamai, Toshiki, 2022. "Economic growth, equilibrium welfare, and public goods provision with intergenerational altruism," European Journal of Political Economy, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:poleco:v:71:y:2022:i:c:s0176268021000628
    DOI: 10.1016/j.ejpoleco.2021.102068
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    More about this item

    Keywords

    Intergenerational altruism; Future bias; Economic growth; Public goods;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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