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Parental altruism, life expectancy and dynamically inefficient equilibria

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  • d'Albis, Hippolyte
  • Decreuse, Bruno

Abstract

Macrodynamic models with finite lifetime and selfish individuals may feature (dynamically) inefficient equilibria, while models with infinite lifetime and altruistic individuals cannot. Do strong intergenerational altruism and high life expectancy prevent the occurence 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 favor overaccumulation. 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 University Library of Munich, Germany in its series MPRA Paper with number 3629.

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Date of creation: Mar 2007
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Handle: RePEc:pra:mprapa:3629

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Keywords: Overlapping generations model; Productive capital; Dynamic (in)efficiency; Intergenerational altruism;

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Cited by:
  1. D'ALBIS Hippolyte & AUGERAUD-VÉRON Emmanuelle, 2009. "Continuous-Time Overlapping Generations Models," LERNA Working Papers 09.15.291, LERNA, University of Toulouse.
  2. PESTIEAU, Pierre & PONTHIERE, Grégory, 2012. "The public economics of increasing longevity," CORE Discussion Papers 2012005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. repec:hal:wpaper:halshs-00676492 is not listed on IDEAS

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