Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

6-2017

Journal or Book Title

The Economic Journal

Volume

127

Issue

602

First Page or Article ID Number

896

Last Page

923

DOI

10.1111/ecoj.12330

Abstract

This paper develops a theory of the two-armed intergenerational welfare state, consistent with key features of modern welfare arrangements, and uses it to rationalise the rise and fall in generosity of pay-as-you-go pensions solely on efficiency grounds. By using the education arm, a dynamically-efficient welfare state is shown to improve upon long-run laissez faire even when market failures are absent. To release these downstream welfare gains without hurting any transitional generation, help from the pension arm is needed. In the presence of an intergenerational education externality, pensions initially rise in generosity but can be replaced by fully funded pensions eventually.

Comments

This is a manuscript of an article published as Andersen, Torben M., and Joydeep Bhattacharya. "The intergenerational welfare state and the rise and fall of pay‐as‐you‐go pensions." The Economic Journal 127, no. 602 (2017): 896-923. doi:10.1111/ecoj.12330. Posted with permission.

Copyright Owner

Royal Economic Society

Language

en

File Format

application/pdf

Published Version

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