Pareto - improving intergenerational transfers

In the presence of endogenous growth intergenerational transferfrom the young to the old reduce per capita income growth andharm future generations. On the other hand, competitive equilibriaare inefficient if externalities sustain long-run growth. Thispaper shows that if individuals retire in the last period oftheir life, the inefficiency of the market economy can be removedby an investment subsidy without making the current or futuregenerations worse off only if coupled with intergenerationaltransfers from the young to the old.