Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119545
Authors: 
Lancia, Francesco
Russo, Alessia
Year of Publication: 
2015
Series/Report no.: 
Memorandum, Department of Economics, University of Oslo 1/2015
Abstract: 
This paper presents a dynamic politico-economic theory of fiscal policy to explain the simultaneous existence of public education and pensions in modern democracies. The driving force of the model is the intergenerational conflict over the allocation of the public budget. Successive generations of voters choose fiscal policies through repeated elections. The political power of elderly voters creates the motive for adults to support public investment in the human capital of future generations, since it expands future pension possibilities. We characterize the Markov perfect equilibrium of the voting game in a small open economy. The equilibrium can reproduce qualitative and quantitative features of intergenerational fiscal policies in modern economies.
Subjects: 
intergenerational conflict
Markov perfect equilibrium
pension
public educatio
repeated voting
small open economy
JEL: 
D72
E62
H23
H30
H53
Document Type: 
Working Paper

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