Altruism, Education and U.S. Wealth Inequality
AbstractThis paper examines the extent to which intergenerational links through transfers of wealth and investment in human capital might help in accounting for the wealth inequality observed in U.S. data. We examine an overlapping-generations heterogeneous agents economy with idiosyncratic risk and altruistic parents. We extend previous models in two main dimensions. First, wealth transfers are derived on the basis of altruism rather than `joy-of-givingâ€™ as assumed in previous computable OLG models. Secondly, we assume that parents can transfer not only wealth (through inter vivos transfers and bequests) but also human capital through education. We find that these features help significantly for accounting for the large inequality in wealth relative to earnings observed in the U.S. In particular, it is shown that altruism helps to explain why the distribution of wealth is more concentrated than the distribution of income, why bequests appear to be a luxury good and why transfer wealth is so high in relation to total wealth
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 423.
Date of creation: 03 Dec 2006
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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intergenerational altruism; overlapping generations; human capital;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
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