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What Is the Natural Weight of the Current Old?

DOI: 10.4236/tel.2013.35043, PP. 257-261

Keywords: Overlapping Generations Model, Learning-by-Doing, Social Welfare

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We consider a simple overlapping generations model with an externality à la Arrow-Romer [1,2] and a government with fiscal powers. If it wishes to maximize a criterion depending on the lifelong utility of agents, is there a natural weight for the utility of the current old? We show in a simple example that this weight depends on the specific features of the model, in particular the length of the horizon, and cannot be chosen arbitrarily. Our result has a neat economic interpretation [2].


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