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Parental Altruism, Life Expectancy and Dynamically Inefficient Equilibria

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  • Hippolyte d'Albis

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique, LERNA - Economie des Ressources Naturelles - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives)

  • Bruno Decreuse

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper presents a continuous time overlapping-generation (OLG) model which generalizes the Blanchard-Buiter-Weil model and clarifies the relationships between dynastic previous termaltruismnext term, the length of planning horizons, and dynamic inefficiency. Our main innovation relies on the introduction of previous termparentalnext termprevious termaltruismnext term, whose intensity is variable. We first show that previous termparentalnext termprevious termaltruism and life expectancy do favor overaccumulation. Second, we give a condition that explains why the Ramsey model may only display dynamic efficiency. These theoretical results are illustrated by a parameterization from US data. Our numerical exercises suggest that the US economy is dynamically efficient, mainly because of the shortness of life expectancy.

Suggested Citation

  • Hippolyte d'Albis & Bruno Decreuse, 2009. "Parental Altruism, Life Expectancy and Dynamically Inefficient Equilibria," Post-Print halshs-00353112, HAL.
    • Handle: RePEc:hal:journl:halshs-00353112
    DOI: 10.1016/j.jedc.2009.05.002
    Note: View the original document on HAL open archive server: https://hal.science/halshs-00353112v2
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    References listed on IDEAS

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    Cited by:

    1. Lesly Cassin, 2018. "The effects of migration and pollution externality on cognitive skills in Caribbean economies: a Theoretical analysis," EconomiX Working Papers 2018-30, University of Paris Nanterre, EconomiX.
    2. D'ALBIS Hippolyte & AUGERAUD-VÉRON Emmanuelle, 2009. "Continuous-Time Overlapping Generations Models," LERNA Working Papers 09.15.291, LERNA, University of Toulouse.
    3. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 41-74, March.
    4. Mauri Kotamäki, 2013. "The Pension Scheme Need Not Be Pay-As-You-Go: An Overlapping Generations Approach," Finnish Economic Papers, Finnish Economic Association, vol. 26(2), pages 56-71, Autumn.
    5. Orlando Gomes, 2022. "Human capital and growth in an OLG-life cycle model," SN Business & Economics, Springer, vol. 2(1), pages 1-26, January.

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    More about this item

    Keywords

    Overlapping-generations models; Productive capital; Dynamic (in)efficiency; Intergenerational altruism;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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