By Dr. Günther Lang (auth.)
This booklet was once born out of a five-years examine at Sonderforschungsbe reich 303 by way of the Deutsche Forschungsgemeinschaft (DFG) at Rheinische Friedrich-Wilhelms-Universitiit Bonn and used to be licensed as my doctoral thesis through the Rechts-und Staatswissenschaftliche Fakultiit in December 1994. It was once my former colleague Wolfgang Peters who had drawn my atten tion to overlapping-generations versions and to difficulties of intergenerational potency and distribution. the sophisticated connection among the latter has been attention-grabbing me from the very starting: redistribution of the result of unfastened exchange can turn into worthwhile from the viewpoint of potency, even supposing no externalities impede the improvement of an financial system. regardless of being a matured a part of economics, neoclassical development thought had left many questions unsolved, a few of them even unrecognized through a wide a part of our career. I took up the problem to give a contribution to the research of a few of those thorny difficulties. the sort of concerns is the customarily quoted thought of the inter generational con tract. even though intergenerational transfers can increase intertemporal effi ciency, the layout of pension schemes to accomplish an development of wellbeing and fitness of a few generations with no hurting that of the other, isn't a simple activity in an economic system with versatile costs. fairly often, merely rate of interest and progress cost are taken into consideration while opting for no matter if a new release wins or looses.
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Extra resources for On Overlapping Generations Models with Productive Capital
In this sense we argue as Koopmans (1965) that one ' ... wishes to choose between principles on the basis of the result of their application' (p. 226). There are, however, other criteria to be found in the literature, for example the maximin criterion by John Rawls (1971) and the fairness criterion due to Foley (1967). Whereas the criterion of fairness, which demands envy-free and Pareto-efficient allocations, has never been applied to an intergenerational framework, the maximin idea was used by Phelps and Riley (1978) to examine under which conditions the utility of the least favoured individual in society can be maximized in an overlapping generations model.
Using the techniques of the Envelope Theorem (see for example the text book by Beavis and Dobbs (1990), chap. 4), we obtain the following properties of g(Xt, u). 1. For all Xt properties: ~ 0 and all u, 0:::; u:::; u(Xt,O), g(Xt,u) has the (i) 8g(Xt, u) 8u 4 0 <, The dual problem reads as follows: given Xt and Xt+l, maximize utility of generation t. (Xt,XtH)' Furthermore, we define x(u) as the lowest budget Xt which makes u feasible at all. 4 Do Fair Allocations Exist? 49 (ii) 8g(Xt,u) 8Xt 0 >, (iii) 8g(Xt, u) > 8g(Xt,0) .
37 Wt+l. This means that choosing A establishes a new bubbleless equilibrium for generation t thereby leaving the allocation (and hence the overall equilibrium) of all generations before and after t unchanged. 4 to see that A may well represent a higher utility than B, implying that generation t is hurt by the introduction of the bubble. Our procedure simply demonstrates that one must only change the production technology and preferences of one generation to turn a Paretoimproving bubbly equilibrium to one which hurts a generation.
On Overlapping Generations Models with Productive Capital by Dr. Günther Lang (auth.)