Pensions,Growth and Concern about the Young

Within an overlapping generations framework, we show that the proportion of old age consumption financed by a pay-as-you-go system can be neutral with respect to the growth path of the economy in the presence of intergenerational transfers implemented by altruistic households or by a fiscal authority. The crucial impact on growth of society's propensity to favour the elderly is discussed. Furthermore, we offer an explanation for the existence of an authority redistributing income among generations when households are selfish. This concerns the fact that it is impossible for young agents to precommit themselves not to ask for some redistribution in their favour when old.