Nonpaternalistic intergenerational altruism (original) (raw)

Equilibrium indeterminacy with parental altruism

Review of Economic Dynamics, 2018

Equilibria where altruistic generations are linked via positive bequests are indeterminate and subject to sunspot variables when each individual's utility in non-separable in her own age contingent consumption and sufficiently biased towards old age. This result does not require strong income effects and it applies if individuals select their own savings and bequests by taking the decisions of their offsprings and successors as given. In this case, the equivalence with the Dynastic Equilibria of a Ramsey-type model envisaged in Barro (1974) fails. To help interpreting my results I compare the olg cum altruism model with a canonical non-altruistic olg economy with two goods and age dependent per period utility functions.

Perfect and total altruism across the generations

Journal of Risk and Uncertainty, 2008

The traditional formulation of the altruism model has altruistic terms that relate solely to other parties’ felicities from consumption. But if those others are altruistic as well, their altruism benefits are being neglected. Total altruism takes the total utilities of others, rather than their mere felicities, as the basis for altruistic valuations. We assess total altruism in an intergenerational world. Perfect altruism, a concept due to Ramsey (Econ. J. 38(152):543–559, 1928), requires that a generation value itself relative to its successor as it would any two consecutive generations. Total altruism and perfect altruism prove to be incompatible concepts. Total altruism is only meaningful when there is some generational selfishness. The analysis considers both forward-looking and forward and backward-looking altruism.

Intergenerational Altruism and Social Welfare: A Critique of the Dynastic Model

1987

In this paper, I show that, under relatively weak conditions, dynastic equilibria are never welfare optima. If a social planner sets policy to maximi.ze a social welfare function, then, except in extreme cases where the planner cares only about a single generation, successive generations will never be linked through altruistically motivated transfers. This suggests that the dynastic model is unsuitable for normative analysis, and, to the extent governments actually behave in this manner, the model is also inappropriate for positive analysis. In addition, I show that, except in a few special cases, the planner's preferences are dynamically inconsistent. If the planner can successfully resolve this inconsistency, then the central result is somewhat modified.

A Closed-Form Solution to a Model of Two-Sided, Partial Altruism

Macroeconomic Dynamics, 2012

This paper presents a closed-form characterization of the allocation of resources in an overlapping generation's model of two-sided, partial altruism. Three assumptions are made: (i) parents and children play Markov strategies, (ii) utility takes the CRRA form, and (iii) the income of children is stochastic but proportional to the saving of parents. In families where children are rich relatively to their parents, saving rates -measured as a function of the family's total resourcesare higher compared to the case when children are poor relative to their parents. Income redistribution from the old to the young, therefore, leads to an increase in aggregate saving. for guidance. Financial support from Banco de Portugal, Fundação Para a Ciência e a Tecnologia and Fundación Ramón Areces is gratefully acknowledged.

Blast from the past: The altruism model is richer than you think

Journal of Economic Theory, 2021

We provide the first full theoretical characterization of the standard two-period altruism model in a deterministic setting, thereby providing a coherent methodology for studying equilibria in this class of models. Under general conditions, policy and value functions are discontinuous; non-smoothness escalates one order higher than in one-player settings due to differing interests among players. We show that there exists a novel type of front-loaded transfer that enables the recipient to stay in autarky. The logic behind it challenges standard theory as it severs the link between transfer motives and first-order conditions. Our results revise qualitative predictions of dynamic altruism models and highlight that their computation demands global, not local, methods. Our results are robust to introducing income shocks and to varying assumptions on parent savings. Numerical experiments indicate that the correctly solved model features more front-loading of transfers than previously thought, accompanied by higher savings of transfer recipients.

A Strategic Altruism Model in Which Ricardian Equivalence Does Not Hold

The Economic Journal, 1990

This article demonstrates that Ricardian Equivalence does not necessarily hold in models with altruistic transfers once one takes into account the strategic behavior of recipients as well as donors. To influence the final allocation of consumption in altruistic settings, potential recipients can threaten to refuse as well as accept transfers. We apply the Extended Nash Bargaining Solution to the problem of an altruistic parent and a possibly altruistic child. The parent and child first choose a threat point noncooperatively; this threat point then influences the final allocation of consumption through the standard Nash Bargaining Solution, While the potential recipient can refuse transfers from the potential donor, he cannot refuse transfers from the government. When the golrernrnenr redistributes between the parent and child, it changes their endowments and the equilibrium threats, and thus the final allocation of onsuaption. The feature of the cooperative model presented here that leads to the failure of Ricardian Equivalence may be characteristic of a wider class of cooperative and noncooperative altruism models. This feature is that noninterior strategic postures underlie interior transfer behavior and that these non-interior strategic postures are altered by government redistribution.

The Microeconomic Basis of Imperfect Altruism

2012

Individuals in the real world exhibit imperfect altruism. There are two distinct kinds of imperfections. The first is that individuals appear to weight the utility of some individuals more than others. We refer to these types of imperfection as “asymmetries of altruism”. The second kind of limitation upon altruism is “paternalistic”. Individuals place different weightings not only on different people, but on different goods. They do not value other individuals’ consumption of goods according to the other individuals’ subjective weighting, but according to their own. In other words, even individuals with symmetric altruism disagree as to which bundle of goods production and consumption maximizes the common good. Both these types of imperfection are shown to result in the empirical prediction that individuals will reduce their level of altruistic giving of resources to other individuals relative to the case of perfect altruism where all individuals agree upon the common good and care ...

Making sense of two-sided altruism

Journal of Monetary Economics, 1987

Recursive dependence of altruistic utility on the utility of both children and parents is analyzed. Given reasonable restrictions on the extent of altruism, it is shown that in the static steady state of a simple overlapping generations model there will be some interval around the Golden Rule in which the economy responds to marginal changes just as would a Diamond economy. Dynamic inefficiency cannot be ruled out even in the presence of two-sided altruism. When per-capita income and consumption are growing at a constant rate, the gift motive can insure dynamic efficiency for some parameter values.

Economic Growth with Intergenerational Altruism

The Review of Economic Studies, 1987

We consider the properties of equilibrium behaviour in an aggregative growth model with intergenerational altruism. Various positive properties such as the cyclicity of equilibrium programs, and the convergence of equilibrium stocks to a steady state, are analyzed. Among other normative properties, it is established that under certain natural conditions, Nash equilibrium programs are efficient and "modified Pareto optimal", in a sense made clear in the paper, but never Pareto optimal in the traditional sense.

Altruism and the macroeconomic effects of demographic changes

Journal of Population Economics, 1997

In this paper we show that the macroeconomic effects of demographic changes strongly depend on the degree of altruism and on the specification of the intertemporal utility function. We allow for agents either to be altruistic in the sense of or non-altruistic. In the latter case, generations are heterogeneous like in the "unloved children" model of . In the former case, where the model is a standard Ramsey model with identical agents, we distinguish a Millian and a Benthamite intertemporal utility function. For each of these models, we study the effects of an anticipated and unanticipated permanent decline in population growth as well as the consequences of a baby-boom/baby-bust scenario.