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A Strategic Altruism Model in Which Ricardian Equivalence Does Not Hold

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  • Kotlikoff, Laurence J
  • Razin, Assaf
  • Rosenthal, Robert W

Abstract

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 transfers. The authors apply the extended Nash bargaining solution to the problem of an altruistic parent and a possible altruistic child. They show that when the government redistributes between the parent and child, it changes their endowments and the equilibrium threats and, thus, the final allocation of consumption. Copyright 1990 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 100 (1990)
Issue (Month): 403 (December)
Pages: 1261-68

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Handle: RePEc:ecj:econjl:v:100:y:1990:i:403:p:1261-68

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Cited by:
  1. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1121-66, December.
  2. Jorge Soares, 2008. "Borrowing Constraints, Parental Altruism and Welfare," Working Papers 08-12, University of Delaware, Department of Economics.
  3. Julian Jamison, 2012. "Games with Synergistic Preferences," Games, MDPI, Open Access Journal, vol. 3(1), pages 41-55, March.
  4. Rebelein, Robert, 2004. "Ricardian Equivalence Survives Strategic Behavior," Vassar College Department of Economics Working Paper Series 62, Vassar College Department of Economics.
  5. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
  6. Loretti I. Dobrescu & Laurence J. Kotlikoff & Alberto F. Motta, 2008. "Why Aren't Developed Countries Saving?," NBER Working Papers 14580, National Bureau of Economic Research, Inc.
  7. Severinov, Sergei, 2006. "Bequests as signals: Implications for fiscal policy," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1995-2008, November.
  8. Yang-Ming Chang, 2012. "Strategic transfers, redistributive fiscal policies, and family bonds: a micro-economic analysis," Journal of Population Economics, Springer, vol. 25(4), pages 1481-1502, October.
  9. Altig, David & Davis, Steven J., 1993. "Borrowing constraints and two-sided altruism with an application to social security," Journal of Economic Dynamics and Control, Elsevier, vol. 17(3), pages 467-494, May.
  10. Laurence J. Kotlikoff, 2001. "Generational Policy," NBER Working Papers 8163, National Bureau of Economic Research, Inc.
  11. Zhang, Jie, 2006. "Second-best public debt with human capital externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 30(2), pages 347-360, February.
  12. Peter Prazmowski, 2014. "Ricardian equivalence and fiscal distortions in the Dominican Republic," Empirical Economics, Springer, vol. 46(1), pages 109-125, February.

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