Learning to Perfect Manipulation: Implications for Fertility, Savings, and Old-Age Social Security
AbstractIn this paper we consider an overlapping generations model with endogenous fertility and two-sided altruism and show the limitations of applying commonly used open loop Nash equilibrium in characterizing equilibrium transfers from parents to children in the form of bequest, and transfers from children to parents as voluntary old-age support. Since in our model children are concerned with parents' old-age consumption, agents have incentives to save less for old age and to have more children so as to strategically induce their children to transfer more old-age support. We formulate such strategic behavior within a sequential multi-stage game and introduce a notion of learning equilibrium to characterize equilibrium manipulative behavior and then study the consequences of such strategic manipulations on private intergenerational transfers, fertility and savings decisions, and on Pareto optimality of equilibrium allocation. We show that the learning equilibrium notion of the paper simplifies computation of subgame perfect equilibrium, subgame perfect equilibrium is the long-run outcome of dynamic learning equilibrium paths (this aids in selecting, sometimes, a unique equilibrium among multiple subgame perfect equilibria), and an open-loop Nash equilibrium involves "incredible" threats from children. We provide an alternative explanation for the existence of publicly provided social security program and examine its role to correct distortions created by strategic manipulation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Labor and Demography with number 9705003.
Length: 25 pages
Date of creation: 28 May 1997
Date of revision:
Note: Type of Document - pdf/pstscript; prepared on IBM PC ; to print on PostScript; pages: 25 ; figures: included. Not published. Posted for your comments.
Contact details of provider:
Web page: http://188.8.131.52
two-sided altruism; endogenous fertility; subgame perfect manipulation of children; social security;
Other versions of this item:
- Lakshmi K Raut, 1997. "Learning to Perfect Manipulation: Implications for Fertility, Savings, and Old-Age Social Security," Working Papers 199704, University of Hawaii at Manoa, Department of Economics.
- Lakshmi K Raut, 1997. "Learning to Perfect Manipulation: Implications for Fertility, Savings, and Old-Age Social Security," Levine's Working Paper Archive 597, David K. Levine.
- D9 - Microeconomics - - Intertemporal Choice and Growth
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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..
- Shleifer, Andrei & Summers, Lawrence H. & Bernheim, B. Douglas, 1986.
"The Strategic Bequest Motive,"
3721794, Harvard University Department of Economics.
- Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986. "The Strategic Bequest Motive," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages S151-82, July.
- Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1985. "The Strategic Bequest Motive," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1045-76, December.
- Lakshmi Kanta Raut, 1992.
"Effect of Social Security on Fertility and Savings: An Overlapping Generations Model,"
Indian Economic Review,
Department of Economics, Delhi School of Economics, vol. 27(1), pages 25-43, July.
- L. K. Raut, . "Effects of Social Security on Fertility and Saving: An Overlapping Generations Model," University of Chicago - Population Research Center 87-13, Chicago - Population Research Center.
- Diamond, P. A. & Mirrlees, J. A., 1978.
"A model of social insurance with variable retirement,"
Journal of Public Economics,
Elsevier, vol. 10(3), pages 295-336, December.
- P. A. Diamond & J. A. Mirrlees, 1977. "A Model of Social Insurance With Variable Retirement," Working papers 210, Massachusetts Institute of Technology (MIT), Department of Economics.
- Kohlberg, Elon, 1976. "A model of economic growth with altruism between generations," Journal of Economic Theory, Elsevier, vol. 13(1), pages 1-13, August.
- Gary S. Becker, 1974.
"A Theory of Social Interactions,"
NBER Working Papers
0042, National Bureau of Economic Research, Inc.
- Veall, Michael R., 1986. "Public pensions as optimal social contracts," Journal of Public Economics, Elsevier, vol. 31(2), pages 237-251, November.
- Becker, Gary S & Barro, Robert J, 1988.
"A Reformulation of the Economic Theory of Fertility,"
The Quarterly Journal of Economics,
MIT Press, vol. 103(1), pages 1-25, February.
- Gary S. Becker & Robert J. Barro, 1988. "A Reformulation of the Economic Theory of Fertility," NBER Working Papers 1793, National Bureau of Economic Research, Inc.
- Gary S. Becker & Robert J. Barro, . "A Reformulation of the Economic Theory of Fertility," University of Chicago - Population Research Center 85-11, Chicago - Population Research Center.
- Pollak, Robert A, 1988. "Tied Transfers and Paternalistic Preferences," American Economic Review, American Economic Association, vol. 78(2), pages 240-44, May.
- Hansson, Ingemar & Stuart, Charles, 1989. "Social Security as Trade among Living Generations," American Economic Review, American Economic Association, vol. 79(5), pages 1182-95, December.
- Nishimura, Kazuo & Zhang, Junsen, 1992.
"Pay-as-you-go public pensions with endogenous fertility,"
Journal of Public Economics,
Elsevier, vol. 48(2), pages 239-258, July.
- Nishimura, K. & Zhang, J., 1990. "Pay-As-You-Go Public Pensions With Endogenous Fertility," Papers 202, Australian National University - Department of Economics.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
- Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 373-88, September.
- Raut, L. K., 1990. "Capital accumulation, income distribution and endogenous fertility in an overlapping generations general equilibrium model," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 123-150, November.
- Diamond, P. A., 1977. "A framework for social security analysis," Journal of Public Economics, Elsevier, vol. 8(3), pages 275-298, December.
- Lakshmi K Raut & Lien H Tran, 1998.
"Motives for Investment in Human Capital of Children: Evidence from Indonesian Family Life Survey Data,"
199801, University of Hawaii at Manoa, Department of Economics.
- Lakshmi K. Raut & Lien H. Tran, 1998. "Motives for investment in human capital of children: evidence from Indonesian Family Life Survey Data," Labor and Demography 9801001, EconWPA.
- Raut, Lakshmi K. & Tran, Lien H., 2005. "Parental human capital investment and old-age transfers from children: Is it a loan contract or reciprocity for Indonesian families?," Journal of Development Economics, Elsevier, vol. 77(2), pages 389-414, August.
- Guataqui, Juan Carlos & García-Suaza, Andrés Felipe & Rodríguez-Acosta, Mauricio, 2009. "Ahorro para el retiro en Colombia: patrones y determinantes," DOCUMENTOS DE TRABAJO 005792, UNIVERSIDAD DEL ROSARIO.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.