Beggar-thy-parents? A Lifecycle Model of Intergenerational Altruism
AbstractThis paper constructs a quantitative general equilibrium model with both lifecycle and dynastic features along with uninsurable labor income to assess differences in wealth and intergenerational transfers across countries. The model features both 'pure' and 'impure' forms of altruism and investigates the role of borrowing constraints in accounting for the timing of intergenerational transfers between intervivos transfers and bequests. Under a perfect capital market, the timing of parental transfers is irrelevant. However, under borrowing constraints, parental transfer will be geared towards helping out borrowing-constrained children. The model is calibrated to match the US and Korean economy. Numerical experiments show that tightening borrowing constraints leads to more intervivos transfers geared towards younger children and lower level of bequest. Borrowing constraints also play a role in accounting for the observed differences in the wealth inequality between the two economies.
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Bibliographic InfoPaper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2008-15.
Length: 46 pages
Date of creation: Oct 2008
Date of revision:
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intervivos transfer; wealth accumulation; incomplete markets;
Find related papers by JEL classification:
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-04 (All new papers)
- NEP-DGE-2008-11-04 (Dynamic General Equilibrium)
- NEP-MAC-2008-11-04 (Macroeconomics)
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