Intragenerational externalities and intergenerational transfers
KOLMAR, MARTIN ; MEIER, VOLKER
In: Journal of Pension Economics and Finance, 2012, vol. 11, no. 4, p. 531-548
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- In an environment with asymmetric information and intragenerational externalities, the implementation of a first-best efficient Clarke-Groves-Vickrey mechanism may not be feasible if it has to be self-financing. By using intergenerational transfers, the arising budget deficit can be covered in every generation only if the initial allocation is not dynamically efficient. While introducing a pay-as-you-go scheme without addressing the externality already yields a Pareto improvement, further welfare gains can be captured by using the additional resources to achieve a perfect internalization