Sustainability via Intergenerational Transfers in a Stock‐Flow‐Consistent Model

Sustainability is about meeting present needs without compromising the needs of future generations. Achieving sustainability is thus bound to have distributional consequences. But to what extent is it possible to correct the ex‐post distribution via transfers between generations? Starting from a numerical example, the analysis uses a stock‐flow‐consistent model with a view to investigate the limitations and consequences of such transfers. It shows that inter‐generational transfers face significant limitations which render compensation payments practically impossible. Moreover, the analysis allows some conclusions regarding the effects of introducing a pension systems and/or a more explicit role of public investment in capital accumulation.