Dynamic Optimization of Intergenerational Collective Welfare: Reconciling Poverty Alleviation and Growth in an OLG Economy

Abstract

This research establishes a dynamic model of collective intergenerational welfare within an overlapping generations (OLG) framework, primarily aimed at reconciling poverty alleviation with economic growth. We construct a collective welfare function to serve as a measure for poverty reduction and proceed to analyze the optimal trajectories for consumption and savings across successive generations. The findings derived from the control program emphasize the critical importance of governmental commitment to implementing credible policies to achieve outcomes that enhance overall well-being. Furthermore, the results indicate that incorporating optimal seigniorage as a financing mechanism can effectively ease the state's insolvency constraint while maintaining compatibility with international lending agreements. These elements offer fresh insights into the interplay among fiscal policy, intergenerational welfare, and sustainable economic growth, thereby underscoring the vital role of well-designed public policies in promoting long-term equity and stability.