Subgame perfect manipulation of children by overlapping generations of agents with two-sided altruism and endogenous fertility
In this paper we consider an overlapping generations model with endogenous fertility and two-sided altruism and show the limitations of applying commonly used open loop Nash equilibrium in characterizing equilibrium transfers from parents to children in the form of bequest, and transfers from children to parents as voluntary old-age support. Since in our model children are concerned with parents' old-age consumption, agents have incentives to save less for old age and to have more children so as to strategically induce their children to transfer more old-age support. We formulate such strategic behavior within a sequential multi-stage game and use the notion of subgame perfect equilibrium to study the consequences of such strategic manipulations on private intergenerational transfers, fertility and savings decisions, and on Pareto optimality of equilibrium allocation. We then examine the role of social security to correct such strategic distortions.
|Date of creation:||05 Apr 1996|
|Date of revision:|
|Note:||Type of Document - Tex; prepared on IBM PC-TEX; to print on PostScript; pages: 16 ; figures: included. This is for electronic circulation to reduce our mailing and xerox cost.|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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.:
- Pollak, Robert A, 1988. "Tied Transfers and Paternalistic Preferences," American Economic Review, American Economic Association, vol. 78(2), pages 240-44, May.
- L. K. Raut, .
"Effects of Social Security on Fertility and Saving: An Overlapping Generations Model,"
University of Chicago - Population Research Center
87-13, Chicago - Population Research Center.
- Lakshmi Kanta Raut, 1992. "Effect of Social Security on Fertility and Savings: An Overlapping Generations Model," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 27(1), pages 25-43, July.
- Becker, Gary S, 1974.
"A Theory of Social Interactions,"
Journal of Political Economy,
University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
- Diamond, P. A., 1977. "A framework for social security analysis," Journal of Public Economics, Elsevier, vol. 8(3), pages 275-298, December.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Gary S. Becker & Robert J. Barro, 1988.
"A Reformulation of the Economic Theory of Fertility,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 103(1), pages 1-25.
- Gary S. Becker & Robert J. Barro, . "A Reformulation of the Economic Theory of Fertility," University of Chicago - Population Research Center 85-11, Chicago - Population Research Center.
- Gary S. Becker & Robert J. Barro, 1986. "A Reformulation of the Economic Theory of Fertility," NBER Working Papers 1793, National Bureau of Economic Research, Inc.
- Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
- Raut, L. K., 1990. "Capital accumulation, income distribution and endogenous fertility in an overlapping generations general equilibrium model," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 123-150, November.
- Veall, Michael R., 1986. "Public pensions as optimal social contracts," Journal of Public Economics, Elsevier, vol. 31(2), pages 237-251, November.
- Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986.
"The Strategic Bequest Motive,"
Journal of Labor Economics,
University of Chicago Press, vol. 4(3), pages S151-82, July.
- Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 373-88, September.
- Hansson, Ingemar & Stuart, Charles, 1989. "Social Security as Trade among Living Generations," American Economic Review, American Economic Association, vol. 79(5), pages 1182-95, December.
- P. A. Diamond & J. A. Mirrlees, 1977.
"A Model of Social Insurance With Variable Retirement,"
210, Massachusetts Institute of Technology (MIT), Department of Economics.
- Diamond, P. A. & Mirrlees, J. A., 1978. "A model of social insurance with variable retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 295-336, December.
- Nishimura, Kazuo & Zhang, Junsen, 1992.
"Pay-as-you-go public pensions with endogenous fertility,"
Journal of Public Economics,
Elsevier, vol. 48(2), pages 239-258, July.
- Nishimura, K. & Zhang, J., 1990. "Pay-As-You-Go Public Pensions With Endogenous Fertility," Papers 202, Australian National University - Department of Economics.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
- Lakshmi Raut, 2006.
"Two-sided altruism, Lindahl equilibrium, and Pareto optimality in overlapping generations models,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(3), pages 729-736, 04.
- Lakshmi K. Raut, 1996. "Two-sided altruism, Lindahl Equilibrium, and Pareto Optimality in Overlapping Generations Models," GE, Growth, Math methods 9604001, EconWPA.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpla:9604003. 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: (EconWPA)
If references are entirely missing, you can add them using this form.