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Altruistic bequests and non-negative savings

Author

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  • Stéphane Lambrecht

    (Université de Lille, Sciences Humaines et Sociales, GREMARS - Groupe de Recherches Modélisation Appliquée à la Recherche en Sciences Sociales - Université de Lille, Sciences Humaines et Sociales, Center for Operations Research and Econometrics CORE - UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

Summary This paper builds on the class of models studying the game interaction between an altruistic benefactor and a selfish recipient. An altruistic parent's bequest is transferred to his selfish son after the former's death and we assume that it is not a valid collateral for bank loans. This is equivalent to adding a non-negativity constraint on savings to the standard bequest model. A crucial mechanism at work is that the son's choice of a level of action can seriously dwarf his budget set. When Becker's result holds, the credit constraint places an upper bound on the strategic savings of the Samaritan's dilemma type. But the constraint on savings also causes the shrinkage of the validity domain of the Rotten Kid Theorem because it may lead both poor and rich heirs to behave unoptimally from the family point of view.

Suggested Citation

  • Stéphane Lambrecht, 2003. "Altruistic bequests and non-negative savings," Post-Print hal-04279647, HAL.
    • Handle: RePEc:hal:journl:hal-04279647
    DOI: 10.1017/S0770451800007910
    as

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