Growth Effects of Annuities and Government Transfers in Perpetual Youth Models

Miyoshi, Yoshiyuki and Toda, Alexis Akira (2016): Growth Effects of Annuities and Government Transfers in Perpetual Youth Models.

Abstract

We show that in overlapping generations endogenous growth models with uncertain lifetime, the introduction of government transfers always increases economic growth by crowding out the private annuity market and increasing accidental bequests. In particular, if the government imposes a flat-rate consumption tax (which is neutral to the consumption-saving margin), uses part of the tax revenue for unproductive purposes, and rebates the rest equally across agents as a lump-sum transfer, the economy grows faster and improves the welfare of future generations.

• Item Type: MPRA Paper
• Language: English
• Keywords: annuity, endogenous growth, overlapping generations, redistribution
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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