Intragenerational externalities and intergenerational transfers
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.
Year of publication: |
2012
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Authors: | Kolmar, Martin ; Meier, Volker |
Institutions: | Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München |
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