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Social optimum in an OLG model with paternalistic altruism

Author

Listed:
  • Marion Davin

    () (Aix Marseille University (Aix Marseille School of Economics), CNRS, EHESS)

  • Karine Gente

    () (Aix Marseille University (Aix Marseille School of Economics), CNRS, EHESS)

  • Carine Nourry

    () (Aix Marseille University (Aix Marseille School of Economics), CNRS, EHESS and IUF)

Abstract

There is no consensus yet on the correct way to write the social utility function in the presence of paternalistic altruism. This note shows that the specification of the central planner objective is crucial for optimal capital accumulation and growth. When paternalistic altruism enters the social welfare function, we depart from the standard Modified Golden Rule. Capital intensity is no more determined by the equality between optimal returns on human and physical capital, and the optimal growth rate is higher when we consider altruism enters in the social welfare function. We calibrate the model for several countries and emphasize large differences on optimal growth rate, according to the specification of the social welfare function.

Suggested Citation

  • Marion Davin & Karine Gente & Carine Nourry, 2012. "Social optimum in an OLG model with paternalistic altruism," Economics Bulletin, AccessEcon, vol. 32(4), pages 3417-3424.
  • Handle: RePEc:ebl:ecbull:eb-12-00300
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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P329.pdf
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    References listed on IDEAS

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    1. Philippe Monfort & David de la Croix, 2000. "Education funding and regional convergence," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(3), pages 403-424.
    2. Helmuth Cremer & Pierre Pestieau, 2006. "Intergenerational Transfer of Human Capital and Optimal Education Policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(4), pages 529-545, October.
    3. Philippe Michel & Jean-Pierre Vidal, 2000. "Economic integration and growth under intergenerational financing of human-capital formation," Journal of Economics, Springer, vol. 72(3), pages 275-294, October.
    4. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-1386, November.
    5. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-834, August.
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    Cited by:

    1. Marion Davin & Karine Gente & Carine Nourry, 2013. "Should a Country Invest more in Human or Physical Capital? A Two-Sector Endogenous Growth Approach," Working Papers halshs-00822391, HAL.
    2. Oliwia Komada, 2015. "Children as a public good in PAYG pension system," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 43.
    3. Davin, Marion & Gente, Karine & Nourry, Carine, 2015. "Should a country invest more in human or physical capital?," Mathematical Social Sciences, Elsevier, vol. 76(C), pages 44-52.

    More about this item

    Keywords

    Social welfare function; Paternalistic altruism; Optimal balanced path;

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • A1 - General Economics and Teaching - - General Economics

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