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Equilibrium indeterminacy with parental altruism

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  • Pietro Reichlin

    (LUISS G. Carli)

Abstract

Equilibria where altruistic generations are linked via positive bequests are indeterminate and subject to sunspot variables when each individual's utility in non-separable in her own age contingent consumption and sufficiently biased towards old age. This result does not require strong income effects and it applies if individuals select their own savings and bequests by taking the decisions of their offsprings and successors as given. In this case, the equivalence with the Dynastic Equilibria of a Ramsey-type model envisaged in Barro (1974) fails. To help interpreting my results I compare the olg cum altruism model with a canonical non-altruistic olg economy with two goods and age dependent per period utility functions. (Copyright: Elsevier)

Suggested Citation

  • Pietro Reichlin, 2019. "Equilibrium indeterminacy with parental altruism," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 24-35, January.
  • Handle: RePEc:red:issued:18-121
    DOI: 10.1016/j.red.2018.12.002
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    File URL: http://dx.doi.org/10.1016/j.red.2018.12.002
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    References listed on IDEAS

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    1. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
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    More about this item

    Keywords

    Indeterminacy; Parental altruism; Bequests; Overlapping generations;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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