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Samuelsonian Economics and the Twenty-First Century$
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Michael Szenberg, Lall Ramrattan, and Aron A. Gottesman

Print publication date: 2006

Print ISBN-13: 9780199298839

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199298839.001.0001

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Paul Samuelson's Amazing Intergenerational Transfer

Paul Samuelson's Amazing Intergenerational Transfer

Chapter:
(p.42) 2 Paul Samuelson's Amazing Intergenerational Transfer
Source:
Samuelsonian Economics and the Twenty-First Century
Author(s):

Laurence J. Kotlikoff

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199298839.003.0003

This chapter presents an overlapping generation model in which the government plays a role of redistribution over the different generations by taking from the young and redistributing to the old. Price changes allow generations to swap consumption from one generation to another in order to equalize the interest rate with the population growth or biological rate. Starvation is possible as an extreme outcome. Social contracts can be set up as enforcement between generations. The so-called Samuelson's Relativity Theory shows how an observer's reference point creates varying policy perceptions. The chapter's model calls for generational accounting to address the phenomenon of young and future generations being affected by net tax rates. While intergenerational transfer can help the old on the one hand, it can also hurt the young on the other.

Keywords:   redistribution, social contracts, biological rate, Samuelson's Relativity Theory, generational accounting

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