Working Paper: NBER ID: w10231
Authors: Mikhail Golosov; Larry E. Jones; Michele Tertilt
Abstract: In this paper, we generalize the notion of Pareto-efficiency to make it applicable to environments with endogenous populations. Two efficiency concepts are proposed, P-efficiency and A-efficiency. The two concepts differ in how they treat people who are not born. We show how these concepts relate to the notion of Pareto-efficiency when fertility is exogenous. We then prove versions of the first welfare theorem assuming that decision making is efficient within the dynasty. Finally, we give two sets of sufficient conditions for non-cooperative equilibria of family decision problems to be efficient. These include the Barro and Becker model as a special case.
Keywords: Pareto optimality; First welfare theorem; Fertility; Dynasty; Altruism
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| population size (J11) | fertility decisions (J13) |
| fertility decisions (J13) | welfare outcomes (I38) |
| altruism among family members (D64) | efficient outcomes (D61) |
| resource scarcity (Q31) | inefficiencies in population (J11) |
| true external effects related to population size (J11) | inefficient fertility choices (J13) |
| efficient decision-making within dynasties (D79) | equilibria can be efficient (D61) |