Kiel Working Papers, Kiel Institute for World Economics
No 904:
The Political Economy of Intra- and Intergenerational Redistribution with Asymmetric Information
Oliver Lorz
Abstract: In this paper redistribution policy is analyzed in a
2-period overlapping generations model with heterogeneous individuals and
asymmetric information between the government and the private sector.
Individuals of the same generation differ with respect to their labor
productivity. In each period, the respective government decides not only
about the distribution of consumption between the working generation and
the retired but also about the distribution within generations - between
individuals with a high and with a low productivity of labor. The
government in period 1 is not able to determine the policy of the
subsequent government in period 2. In the political equilibrium,
consumption of high- and low-productivity individuals is inefficiently
allocated over their life cycle. For a given level of aggregate savings, a
Pareto-improvement would be achieved, if high-productivity individuals
consumed less during their working life and more during retirement in the
following period, whereas low-productivity individuals had to consume more
during their working life and less during retirement. In addition to this
inefficiency, the government in period 1 may choose an inefficient level of
aggregate savings in the equilibrium. It is shown for a specific example
that an increase in aggregate savings would be Pareto-improving.
Keywords: Overlapping generations, redistribution, political economy, asymmetric information.; (follow links to similar papers)
20 pages, January 1999
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Downloadable files:
kap?selectedYear=1999 
Download Statistics
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design Joakim Ekebom
