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Parental Altruism, Life Expectancy, And Dynamically Inefficient Equilibria

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Author Info
Hippolyte D'Albis () (LERNA - Economie des Ressources Naturelles - INRA : UR1081 - CEA : DPG - Université des Sciences Sociales - Toulouse I)
Bruno Decreuse () (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579)

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Abstract

Macrodynamic models with finite life time and selfish individuals may feature (dynamically) inefficient equilibria, while models with infinite life time and altruistic individuals cannot. Do strong inter generational altruism and high life expectancy prevent the occurrence of inefficient equilibria ? To answer this question, we present a continuous time OLG model which generalizes the Blanchard-Buiter-Weil model. Our main innovation relies on the introduction of parental altruism, whose intensity is variable. We show that parental altruism and life expectancy actually favour over accumulation. Theoretical results are illustrated by a parametrization from US data. Our numerical exercises suggest that the US economy is dynamically inefficient, mainly because life expectancy is sufficiently short.

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Paper provided by HAL in its series Working Papers with number halshs-00353112_v1.

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Date of creation: 01 Mar 2007
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Keywords: Overlapping generations model ; Productive capital ; Dynamic (in)efficiency ; Intergenerational altruism;

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  1. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1989. "Assessing Dynamic Efficiency: Theory and Evidence," NBER Working Papers 2097, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April. [Downloadable!] (restricted)
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  3. Bullard, James & Russell, Steven, 1999. "An empirically plausible model of low real interest rates and unbacked government debt," Journal of Monetary Economics, Elsevier, vol. 44(3), pages 477-508, December. [Downloadable!] (restricted)
  4. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December. [Downloadable!] (restricted)
  5. Cass, David, 1972. "On capital overaccumulation in the aggregative, neoclassical model of economic growth: A complete characterization," Journal of Economic Theory, Elsevier, vol. 4(2), pages 200-223, April. [Downloadable!] (restricted)
  6. Galor, Oded & Ryder, Harl E., 1991. "Dynamic efficiency of steady-state equilibria in an overlapping-generations model with productive capital," Economics Letters, Elsevier, vol. 35(4), pages 385-390, April. [Downloadable!] (restricted)
  7. Edmond S. Phelps, 1964. "Second Essay on the Golden Rule of Accumulation," Cowles Foundation Discussion Papers 173, Cowles Foundation, Yale University. [Downloadable!]
  8. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec.. [Downloadable!] (restricted)
  9. Andrew B. Abel, . "Birth, Death and Taxes," Rodney L. White Center for Financial Research Working Papers 13-89, Wharton School Rodney L. White Center for Financial Research.
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  10. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November. [Downloadable!] (restricted)
  11. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-93, June. [Downloadable!] (restricted)
  12. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation, Yale University. [Downloadable!]
  13. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-11, Sept.-Oct. [Downloadable!] (restricted)
  14. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January. [Downloadable!] (restricted)
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  15. Saint-Paul, Gilles, 1992. "Fiscal Policy in an Endogenous Growth Model," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1243-59, November. [Downloadable!] (restricted)
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  16. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March. [Downloadable!] (restricted)
  17. repec:cup:cbooks:9780521001151 is not listed on IDEAS
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