Preying on the young: Intergenerational conflict, rent seeking and growth

This paper argues that the distribution of political power across generations in democracies affects rent seeking and growth. The basis for this argument is that it takes time to acquire the skills and connections that are necessary to collect rents. As a result, mostly older individuals can benefit from rent seeking. Consequently, the old use their political power to induce more rents. This activity increases government spending, which crowds out investment, reduces growth and generates rents. The paper explores these ideas, with the help of an infinite overlapping generations model, with probabilistic voting and time consistent government policy. A calibration of the model indicates that it is consistent with key economic features of OECD countries.