Self-Enforcing Intergenerational Transfers and the Provision of Education (original) (raw)
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Education policy in a non-altruistic model of intergenerational transfers with endogenous fertility
European Journal of Political Economy, 1997
This paper uses an overlapping generation model with endogenous fertility to study households' educational choices. Individuals are assumed to be selfish and the intra-family deals are ruled by a self-enforcing 'family constitution'. Within this framework, parents Ž finance their children's education inasmuch as they receive a return a share of the . increased earnings accruing to the children . We show that under this arrangement, individuals purchase less education than socially optimal. This yields a rationale for public action, either via public provision or via subsidization. We analyse both policies and find that they have different implications for households' fertility decisions. In particular, public provision should be preferred if we wish to keep the rate of population growth as high as Ž . possible e.g. to alleviate the pressure of an ageing population on the pension system . JEL classification: J13; H52
Chapter 13 Microeconomic models of family transfers
Handbook of the Economics of Giving, Altruism and Reciprocity, 2006
890 Keywords 891 1. What families are made of 892 2. Altruism, or the power of families 893 2.1. The eight pillars of pure one-sided altruism, and redistributive neutrality 894 2.2. Two-sided altruism 898 2.3. Multiple recipients or multiple donors 901 2.3.1. Where altruistic fairness leads to inequality, and the Rotten Brother theorem 901 2.3.2. Free-riding on the other's altruism 904 2.4. Extending the model to endogenous incomes 907 2.4.1. Where the child may become rotten 908 2.4.2. The Samaritan dilemma and future uncertainty 911 2.4.3. Parents can't be rotten, but two goods complicate the picture 912 2.5. Daddy knows best 914 3. Impure altruism: merit good and transfers as a means of exchange 915 3.1. Child's effort as a merit good 916 3.2. Buying or extorting the child's services or the parent's inheritance 917 3.2.1. From transfer to transaction 918 3.2.2. The case of a dominant child 921 3.2.3. A strategy to buy the children's services 923 A. Laferrère and F. Wolff 3.3. Transfers as family loans 925 3.4. Family insurance and banking 928 3.5. Decisions within the family: altruism and collective models 929 3.6. Pure and impure altruism 932 4. Non-altruism: transfers as old-age security 933 4.1. The mutuality model or how to glue the generations together 934 4.2. Old age support: other mechanisms 938 5. The formation of preferences 939 5.1. To imitate or to demonstrate? 939 5.2. Cultural transmission and endogenous preferences 942 5.2.1. Cultural transmission 944 5.2.2. Endogenous altruism, prices and interest 945 6. Tests of family transfer models 948 6.1. Who gives what, and to whom? 948 6.2. Institutions and family transfers 951 6.3. The limited scope of pure altruism 952 6.4. Tests of family mutuality models 956 7. Conclusion: homo reciprocans, or living in a world of externalities 958 References 961
Intergenerational transfer institutions public education and public pensions
1998
In a world in which credit markets to finance investments in human capital are rare, the competitive equilibrium allocation generally cannot achieve either static or dynamic efficiency. When generations overlap, this inefficiency can be overcome by properly designed institutions. We study the working of two such institutions: Public Education and Public Pensions. We argue that, when established jointly, they implement an intergenerational dynamic game of taxes and transfers through which public education for the young and public pensions for the elderly support each other. Through the public financing of education, the young borrow from the middle age to invest in human capital. When employed, they pay back their debt by means of a social security tax on labor income. The proceedings of the latter are used to finance pension payments to the now elderly lenders. We also show that such intergenerational agreement can be supported as a sub game perfect equilibrium of, relatively straightforward, majority voting games. While the intertemporal allocation so obtained does not necessarily reach full dynamic efficiency it does so under certain restrictions and it always improves upon the laissez-faire allocation. We test the main predictions of our model by using micro and macro data from Spain. The results are surprisingly good.
Household formation and the failure of intergenerational resource allocation
Economics Letters, 1984
The present paper introduces a (biological) reproduction process of households into Barro's simple overlapping generations model with bequests. This leads to a model in which capital will typically be underaccumulated relative to the socially optimal level because of the coordination problem regarding bequests.
When You Need It or When I Die? Timing of Monetary Transfers from Parents to Children
SSRN Electronic Journal, 2016
T his paper investigates the tim ing of w ealth transfers betw een generations. W e develop an overlapping generations m odel in w hich each generation can borrow against its future incom e but not against expected bequest. A s a result, generations relatively poorer than their parents m ay end up not sm oothing consum ption. W e prove that if w ealth transfers can take place earlier in life, then each generation sm ooths consum ption despite the constraint on borrow ing and the first best solution is restored. T he m odel im plies that parents transfer resources w hen the children are credit constrained. T his im plication is tested using D utch survey data on households' intentions to m ake intervivos transfers m atched w ith adm inistrative data that allow to construct a m easure of the probability of being in need of a transfer. A ll in all, the paper highlights the im portance of intervivos transfers as a device that households can resort to in order to m itigate inter-generational w ealth inequalities. K e y w o r d s intervivos transfers, credit constraints, overlapping generations JEL Codes
2015
I developed a dynamic deterministic general equilibrium model accounting for human capital accumulation through both home education and schooling. The model is characterized by an altruistic link between households of succeeding generations in the sense parents, caring about their children’s welfare, freely impart them some knowledge at home in addition to helping them financially when they are schooling. The education regime is private and features distinguishing my model from related works are: (1) young households are economically active and work part-time while schooling, (2) allocating time to schooling or labor entails disutility, (3) tuition is proportional to the time allocated to schooling. I calibrated the model to some balanced growth facts observed between 1981 and 2013 in the Province of Quebec. The model is then used to investigate the contribution of human capital to economic growth. To do that, I simulate it assuming in turn a permanent rise in the tuition rate and t...
Intergenerational Interactions in Human Capital Accumulation
SSRN Electronic Journal, 2000
We analyze an economy populated by a sequence of generations who decide over their consumption levels and the levels of investment in human capital of their immediate descendants. The objective of the paper is to identify the impact of strategic interactions between consecutive generations on the time path of human capital accumulation. To this end, we characterize the Markov perfect equilibrium (MPE) in such an economy and derive the sufficient conditions for its existence and uniqueness. The equilibrium path is computed using a novel constructive approach: extending Reffett and Woźny (2008), we put forward an iterative procedure which converges to the MPE as its limit.
Endogenous fertility, altruistic behavior across generations, and social security systems
Journal of Population Economics, 1990
The present paper explores the impact of an intergenerational externality on private fertility decisions, under a pay-as-you-go social security system. The analysis is performed in the framework of a steady state growth model, with overlapping generations. To explain why households have children, altruism between parents and children is assumed. Surprisingly, the effects of altruism are not symmetric. The private fertility decisions are optimal only if children ,,love" their parents, because children then make private transfers at exactly the right level. * Comments of participants of a seminar on economic theory of Prof. K. Jaeger at Free University of Berlin at July 20, 1989, are gratefully acknowledged. I am indebted to Alessandro Cigno, Frank Klanberg and Elmar Wolfstetter for many helpful suggestions.
Survival of the gene, intergenerational transfers and precautionary saving
Journal of Development Economics, 2005
This paper provides a model of bequest and investment in children's human capital at low incomes. It posits that parents and children are linked through their common concern of grandchildren and intergenerational transfers provide a material basis for the perpetuation of the family line. The model characterizes intergenerational strategic interactions in a dynamic game theoretical framework. Moreover, it explores intergenerational uncertainty as a source of precautionary saving. In contrast with the existing literature, the model implies that there are qualitative differences between precautionary saving from one's own income uncertainty and precautionary bequests from children's income uncertainty.