Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?

This paper studies the ability of nonmarket institutions to invest optimally in forward intergenerational goods (FIGs), such as education and the environment, when agents are selfish or exhibit paternalistic altruism. We show that backward intergenerational goods (BIGs), such as social security, play a crucial role in sustaining investment in FIGs: without them investment is inefficiently low, but with them optimal investment is possible. We also show that making the provision of BIGs mandatory crowds out the voluntary provision of FIGs, and that population aging can increase investment in FIGs.

Nonmarket Institutions for Credit and Risk Sharing in Low-Income Countries

The design credit and risk institutions in low-income countries provides one of the most exciting testing grounds for theories of contracting with imperfect information and limited enforcement. This paper reviews some of the recent literature, with a special focus on nonmarket institutions that cope with risk and provide credit. This literature attempts to bring together insights from economic theory, especially information economics, contract theory, and mechanism design theory. However, it is also applied, being motivated by the circumstance of the poor countries that their authors have visited and studied.