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Intergenerational Altruism, Dynastic Equilibria and Social Welfare

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  • B. Douglas Bernheim

Abstract

The purpose of this paper is to explore the welfare properties of dynastic equilibria. There are three central findings. First, under relatively weak conditions, welfare optima cannot be implemented as dynastic equilibria with positive levels of transfers. Second, intergenerational altruism ordinarily renders the objectives of social planners dynamically inconsistent, thereby making implementation of welfare optima problematic. Third, if a planner successfully resolves dynamic inconsistency by committing himself to respect the preferences of deceased generations, and if there are a sufficient number of prior generations, then in a specific set of cases dynastic equilibria are approximately welfare optimal.

Suggested Citation

  • B. Douglas Bernheim, 1989. "Intergenerational Altruism, Dynastic Equilibria and Social Welfare," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 119-128.
  • Handle: RePEc:oup:restud:v:56:y:1989:i:1:p:119-128.
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    File URL: http://hdl.handle.net/10.2307/2297753
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    Cited by:

    1. Leers, T. & Meijdam, A.C. & Verbon, H.A.A., 1998. "Ageing and Pension Reform in a Small Open Economy : The Role of Savings Incentives," Discussion Paper 1998-90, Tilburg University, Center for Economic Research.
    2. Michel, Philippe & Thibault, Emmanuel & Vidal, Jean-Pierre, 2006. "Intergenerational altruism and neoclassical growth models," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
    3. Soares, Jorge, 2015. "Borrowing constraints, parental altruism and welfare," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 1-20.
    4. repec:oup:restud:v:84:y:2017:i:3:p:1264-1305. is not listed on IDEAS
    5. Nicola Pavoni & Hakki Yazici, 2017. "Intergenerational Disagreement and Optimal Taxation of Parental Transfers," Review of Economic Studies, Oxford University Press, vol. 84(3), pages 1264-1305.
    6. Martin Feldstein & Andrew Samwick, 1997. "The Economics of Prefunding Social Security and Medicare Benefits," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 115-164 National Bureau of Economic Research, Inc.
    7. Robinson, James A. & Srinivasan, T.N., 1993. "Long-term consequences of population growth: Technological change, natural resources, and the environment," Handbook of Population and Family Economics,in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 21, pages 1175-1298 Elsevier.
    8. Gale, William & Slemrod, Joel, 2001. "Death Watch for the Estate Tax?," MPRA Paper 56440, University Library of Munich, Germany.
    9. Alexander Ludwig & Michael Reiter, 2010. "Sharing Demographic Risk--Who Is Afraid of the Baby Bust?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(4), pages 83-118, November.
    10. Francisco M. Gonzalez & Itziar Lazkano & Sjak A. Smulders, 2014. "Second-best national saving and growth with intergenerational disagreement," Working Papers 1403, University of Waterloo, Department of Economics, revised Mar 2014.
    11. Francisco M. Gonzalez & Itziar Lazkano & Sjak A. Smulders, 2015. "Future-biased government," Working Papers 1502, University of Waterloo, Department of Economics, revised Oct 2015.
    12. Garance Genicot & Debraj Ray, 2014. "Aspirations and Inequality," NBER Working Papers 19976, National Bureau of Economic Research, Inc.
    13. Meijdam, Lex & Verbon, Harrie A A, 1997. "Aging and Public Pensions in an Overlapping-Generations Model," Oxford Economic Papers, Oxford University Press, vol. 49(1), pages 29-42, January.
    14. Alexander Ludwig & Michael Reiter, 2008. "Sharing Demographic Risk – Who is Afraid of the Baby Bust?," MEA discussion paper series 08166, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    15. Jorge Soares, 2010. "Welfare Impact Of A Ban On Child Labor," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 1048-1064, October.
    16. Francisco M. Gonzalez & Itziar Lazkano & Sjak A. Smulders, 2017. "Future-biased Intergenerational Altruism," Working Papers 1703, University of Waterloo, Department of Economics, revised Apr 2017.
    17. William G. Gale & Joel B. Slemrod, 2001. "Policy Watch: Death Watch for the Estate Tax?," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 205-218, Winter.
    18. repec:eee:eecrev:v:96:y:2017:i:c:p:1-17 is not listed on IDEAS
    19. Doepke, Matthias, 2013. "Exploitation, Altruism, and Social Welfare: An Economic Exploration," CEPR Discussion Papers 9509, C.E.P.R. Discussion Papers.
    20. Hamada, Kojun & Yanagihara, Mitsuyoshi, 2016. "Intergenerational altruism and the transfer paradox in an overlapping generations model," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 161-167.
    21. Meijdam, Lex & van de Ven, Martijn & Verbon, Harrie A. A., 1996. "The dynamics of government debt," European Journal of Political Economy, Elsevier, vol. 12(1), pages 67-90, April.
    22. Emmanuel Farhi & Iván Werning, 2007. "Inequality and Social Discounting," Journal of Political Economy, University of Chicago Press, vol. 115, pages 365-402.
    23. Liliana E. Pezzin & Robert A. Pollak & Barbara Steinberg Schone, 2008. "Parental Marital Disruption, Family Type, and Transfers to Disabled Elderly Parents," Journals of Gerontology: Series B, Gerontological Society of America, vol. 63(6), pages 349-358.
    24. Theo Leers & Lex Meijdam & Harrie A. A Verbon, 2001. "The Politics of Pension Reform under Ageing," CESifo Working Paper Series 521, CESifo Group Munich.
    25. Spataro, Luca & De Bonis, Valeria, 2008. "Accounting for the "disconnectedness" of the economy in OLG models: A case for taxing capital income," Economic Modelling, Elsevier, vol. 25(3), pages 411-421, May.

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