This paper analyzes the direction of optimal intergenerational transfers in a setting of endogenous growth à la Arrow-Romer. It shows that the case for ascending transfers such as implied by pay-as-you-go social security is rather weak. What is rather needed is a subsidy on interest income....

This paper considers a three-overlapping-generations model of endogeneous growth wherein human capital is the engine of growth. It first contrasts the laissez-faire and the optimality solutions. Then it discusses alternative sets of tax-transfer instruments that allow for decentralization of the...