SOCIAL-SECURITY AND STRATEGIC INTER-VIVOS TRANSFERS OF SOCIAL CAPITAL

This paper explains public provision of social capital in an overlappi ng generations model with 'gerontocracy', without resort to any beques t motive. The old generation has an incentive to provide education and infrastructure because these goods shift the Laffer curve of social s ecurity taxation, thereby increasing old-age income in the political e quilibrium. The incentive is stronger if population growth is larger, The marginal productivity of social capital in the political equilibri um may exceed or fall short of the marginal productivity of social cap ital in an efficient allocation.