Working Paper: CEPR ID: DP12787
Authors: Pietro Reichlin
Abstract: 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. I show that the structure of equilibria of the olg model with altruism is more similar to the one generated in a canonical olg economy with two goods.
Keywords: bequests; parental altruism; indeterminacy
JEL Codes: E10; E21; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental altruism (D64) | Individual savings behavior (D14) |
| Individual savings behavior (D14) | Equilibrium indeterminacy (D59) |
| Parental altruism (D64) | Equilibrium indeterminacy (D59) |
| Altruistic bequests (D64) | Equilibrium indeterminacy (D59) |
| Utility function bias towards old-age consumption (D15) | Equilibrium indeterminacy (D59) |