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Altruism, Fertility and Risk

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  • Cordoba, Juan Carlos
  • Liu, Xiying

Abstract

This paper studies fertility choices and fertility policies when children's earning abilities are random and parents are altruistic. We characterize equilibrium allocations arising in endowment economies with either complete or incomplete markets. Both models can replicate a number of empirical regularities, such as inequality, social mobility and fertility decreasing with ability, but the incomplete markets model provides a number of more plausible predictions. We find that fertility policies are generally welfare detrimental in our models even when fertility is inefficiently high.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p17481-2014-04-05.pdf
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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 37481.

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Date of creation: 05 Apr 2014
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Handle: RePEc:isu:genres:37481

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Related research

Keywords: Idiosyncratic risk; Bewley model; Fertility; uninsurable risk; complete markets; incomplete markets;

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References

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  1. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969.
  2. Marla Ripoll & Juan Carlos Cordoba, 2011. "A Contribution to the Economic Theory of Fertility," 2011 Meeting Papers 1207, Society for Economic Dynamics.
  3. Mikhail Golosov & Larry E Jones & Michèle Tertilt, 2003. "Effciency with Endogenous Population Growth," Levine's Working Paper Archive 666156000000000310, David K. Levine.
  4. Krusell, Per & Mukoyama, Toshihiko & Smith Jr., Anthony A., 2011. "Asset prices in a Huggett economy," Journal of Economic Theory, Elsevier, vol. 146(3), pages 812-844, May.
  5. Fernando Alvarez, 1999. "Social Mobility: The Barro-Becker Children Meet the Laitner-Loury Dynasties," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 65-103, January.
  6. Cordoba, Juan Carlos & Ripoll, Marla, 2014. "Intergenerational Transfers and the Fertility-Income Relationship," Staff General Research Papers 37662, Iowa State University, Department of Economics.
  7. Moav, Omer, 2001. "Cheap Children and the Persistence of Poverty," CEPR Discussion Papers 3059, C.E.P.R. Discussion Papers.
  8. Matthias Doepke, 2001. "Accounting for Fertility Decline During the Transition to Growth," UCLA Economics Working Papers 804, UCLA Department of Economics.
  9. Liao, Pei-Ju, 2013. "The one-child policy: A macroeconomic analysis," Journal of Development Economics, Elsevier, vol. 101(C), pages 49-62.
  10. Hosseini, Roozbeh & Jones, Larry E. & Shourideh, Ali, 2013. "Optimal contracting with dynastic altruism: Family size and per capita consumption," Journal of Economic Theory, Elsevier, vol. 148(5), pages 1806-1840.
  11. Gaviria, Alejandro, 2002. "Intergenerational mobility, sibling inequality and borrowing constraints," Economics of Education Review, Elsevier, vol. 21(4), pages 331-340, August.
  12. S. Rao Aiyagari, 1993. "Uninsured idiosyncratic risk and aggregate saving," Working Papers 502, Federal Reserve Bank of Minneapolis.
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