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Income-Dependent Parental Altruism And Persistent Income Inequality In A Developing Economy

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  • XIANGYUN YIN

    (Graduate School of Economics, Kobe University, 2-1 Rokkodai, Nada, Kobe 657-8501, Japan)

  • TAMOTSU NAKAMURA

    (Graduate School of Economics, Kobe University, 2-1 Rokkodai, Nada, Kobe 657-8501, Japan)

Abstract

In this paper, we consider an overlapping-generations economy in which human capital is the engine of economic growth. Human capital accumulates through parents’ investments in their children based on warm-glow altruism. Assuming that parental altruism depends on parental income, we introduce a utility function into a simple model to explain the relationship between parental income and education expenditure. Consequently, various dynamics of household human capital accumulation emerge, which in turn yield a variety of income inequalities. This highlights the importance of income-dependent parental altruism in determining income inequality not only in the transition but also in the steady state. It is also shown that income inequality may persist in the long run.

Suggested Citation

  • Xiangyun Yin & Tamotsu Nakamura, 2025. "Income-Dependent Parental Altruism And Persistent Income Inequality In A Developing Economy," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 70(06), pages 1565-1582, September.
    • Handle: RePEc:wsi:serxxx:v:70:y:2025:i:06:n:s0217590824500462
    DOI: 10.1142/S0217590824500462
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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