Government Debt, Human Capital, and Bequests in a Life-Cycle Model

In a Samuelson overlapping-generations model, conditions for an operative interegenerational transfer motive are derived without special assumptions about the form of the utility function. Crucial in determining if transfers will be positive is the rate at which individuals discount heirs' utility relative to the market interest rate. It is also shown that transfers of human capital (such as investment in education) are not equivalent to ordinary bequests for the bonds-as-net-wealth controversy. If intergenerational transfers take the form of human capital, issuance of government bonds or social security can affect the equilibrium solution, even if the transfer motive is fully operative.