Marcello D’Amato; Galasso, Vincenzo - IGIER (Innocenzo Gasparini Institute for Economic … - 2008
In a stochastic two-period OLG model, featuring an aggregate shock to the economy, ex-ante optimality requires intergenerational risk sharing. We compare the level of time-consistent intergenerational risk sharing chosen by a social planner and by office seeking politicians. In the political...