Rotten Spouses, Family Transfers and Public Goods
We show that once interfamily exchanges are considered, Becker's rotten kids mechanism has some remarkable implications that have gone hitherto unnoticed. Specifically, we establish that Cornes and Silva's (1999) result of efficiency in the contribution game amongst siblings extends to a setting where the contributors (spouses) belong to different families. More strikingly still, the mechanism does not just have consequences for efficiency but it may have dramatic redistributive implications. In particular, we show that the rotten kids mechanism combined with a contribution game to a household public good may lead to an astonishing equalization of consumptions between the spouses and their parents, even when their parents' wealth levels differ. We consider two families, each consisting of a parent and an adult child, who are "linked" by the young spouses. Children contribute part of their time to a household (couple) public good and provide attention to their respective parents "in exchange" for a bequest. Spouses behave towards their respective parents like Becker's rotten kids; they are purely selfish and anticipate that their altruistic parents will leave them a bequest. The most striking results obtain when wages are equal and when parents' initial wealth levels are not too different. For very large wealth differences the mechanism must be supplemented by a (mandatory) transfer that brings them back into the relevant range. When wages differ but are similar the outcome will be near efficient (and near egalitarian).
|Date of creation:||Feb 2014|
|Date of revision:|
|Publication status:||forthcoming in: Journal of Population Economics, 2015|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cremer, Helmuth & Roeder, Kerstin, 2013.
"Long-term care and lazy rotten kids,"
TSE Working Papers
13-424, Toulouse School of Economics (TSE).
- Cremer, Helmuth & Roeder, Kerstin, 2013. "Long-Term Care and Lazy Rotten Kids," IZA Discussion Papers 7565, Institute for the Study of Labor (IZA).
- Helmuth Cremer & Kerstin Roeder, 2013. "Long-Term Care and Lazy Rotten Kids," CESifo Working Paper Series 4372, CESifo Group Munich.
- Cremer, Helmuth & Roeder, Kerstin, 2013. "Long-term care and lazy rotten kids," IDEI Working Papers 789, Institut d'Économie Industrielle (IDEI), Toulouse.
- Christine Schwartz & Robert Mare, 2005. "Trends in educational assortative marriage from 1940 to 2003," Demography, Springer;Population Association of America (PAA), vol. 42(4), pages 621-646, November.
- Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
- Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October.
- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
- Richard C. Cornes & Emilson C.D. Silva, 1997.
"Rotten Kids, Purity and Perfection,"
Keele Department of Economics Discussion Papers (1995-2001)
97/13, Department of Economics, Keele University.
- Wolff, Francois-Charles, 2006. "Microeconomic models of family transfers," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7998. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.