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A bequest-constrained economy: Welfare analysis

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  • Nerlove, Marc
  • Razin, Assaf
  • Sadka, Efraim

Abstract

Bequest constraints have played a major role in discussions of debt neutrality but their welfare implications were not sufficiently dealt with in the literature. In this paper we focus on the welfare implications of bequest constraints. We found that when institutional constraints to the transfer of resources from children to their parents exists the welfare of the parents' generation may be improved by an old age security scheme. Such a scheme is justified not by income redistribution consideration, as is typically the case, but rather on pure efficiency grounds. Due to its intergenerational transfer role the social security scheme is Pareto-improving with altruistic parents if, in addition, the real income effect which tends to raise children consumption is relatively strong.
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  • Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1988. "A bequest-constrained economy: Welfare analysis," Journal of Public Economics, Elsevier, vol. 37(2), pages 203-220, November.
  • Handle: RePEc:eee:pubeco:v:37:y:1988:i:2:p:203-220
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    1. 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..
    2. Kimball, Miles S., 1987. "Making sense of two-sided altruism," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 301-326, September.
    3. 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 467-467.
    4. Andrew B. Abel, "undated". "An Analysis of Fiscal Policy Under Operative and Inoperative Bequest Motives," Rodney L. White Center for Financial Research Working Papers 10-87, Wharton School Rodney L. White Center for Financial Research.
    5. Becker, Gary S & Murphy, Kevin M, 1988. "The Family and the State," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 1-18, April.
    6. Drazen, Allan, 1978. "Government Debt, Human Capital, and Bequests in a Life-Cycle Model," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 505-516, June.
    7. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1984. "Investment in Human and Nonhuman Capital, Transfers among Siblings, and the Role of Government," Econometrica, Econometric Society, vol. 52(5), pages 1191-1198, September.
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    Cited by:

    1. Farmer, Michael C., 2005. "Environmental consequences of social security reform: a second best threat to public conservation," Ecological Economics, Elsevier, vol. 53(2), pages 191-209, April.
    2. Ranjan, Priya, 2001. "Credit constraints and the phenomenon of child labor," Journal of Development Economics, Elsevier, vol. 64(1), pages 81-102, February.
    3. Michael Voigtländer, 2005. "Qualitative und quantitative Aspekte einer Elternrente?," List Forum Chapter,in: List Forum Band 31, edition 1, volume 3, chapter 13, pages 215-230 List Gesellschaft e.V..
    4. Baland, Jean-Marie & Robinson, James A., 2002. "Rotten parents," Journal of Public Economics, Elsevier, vol. 84(3), pages 341-356, June.
      • Baland, J.M. & Robinson, J.A., 1998. "Rotten Parents," Papers 207, Notre-Dame de la Paix, Sciences Economiques et Sociales.
    5. Alders, Peter & Broer, D. Peter, 2005. "Ageing, fertility, and growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1075-1095, June.

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