Time Consistency and Intergenerational Risk Sharing

It is shown how intergenerational risk sharing can be achieved by transfers from the young generation to the old generation such that the young gener-ation will never have an incentive to unilaterally renege on the transfer. This contradicts a claim made in Gordon and Varian (1988) that intergenerational risk-sharing is infeasible because of problems of time consistency. It is shown however, that even in a stationary environment, time consistent transfers are always non-stationary