Intergenerational redistribution with asymmetric information: The case of non-observable savings

Arbeitspapier

This paper analyzes intergenerational redistribution in a 2-period overlapping- generations model that allows for heterogeneous labor productivities within the working generation. In each period, the government decides about redistributive transfers to maximize the aggregate utility of the members of both generations. There is asymmetric information between the government and the private sector: The government can only observe labor incomes but not individual labor supply or individual productivities. In addition, individual savings and capital incomes are not observable for the government. It is shown that the political economy equilibrium is not Pareto-efficient. Redistribution results in equal consumption levels of individuals with different labor productivities. This destroys incentives for individuals with a high labor productivity to earn a higher labor income than individuals with a low labor productivity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Year: 1999 ; Kiel: Institut für Weltwirtschaft (IfW)

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Positive Analysis of Policy Formulation and Implementation ; Asymmetric and Private Information; Mechanism Design
• Subject: Overlapping generations ; redistribution ; political economy ; asymmetric information ; Einkommensumverteilung ; Generationenbeziehungen ; Overlapping Generations ; Public Choice ; Sparen ; Intertemporale Allokation ; Pareto-Optimum ; Asymmetrische Information ; Ökonomischer Anreiz ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lorz, Jens Oliver
• Event: Veröffentlichung
• (who): Kiel Institute of World Economics (IfW) ; ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/46780
• Last update: 10.03.2025, 11:43 AM CET