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Capital Accumulation and Fiscal Policy in an OLG Model with Family Altruism

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  • STÉPHANE LAMBRECHT
  • PHILIPPE MICHEL
  • EMMANUEL THIBAULT

Abstract

The idea of family altruism is that parents care only about their children's income and not about the use of this income made by the children. First, we establish dynamical properties which place the OLG model with family altruism halfway between the model with pure life‐cyclers (Diamond 1965; American Economic Review 55, 1126–1150) and the one with dynastic altruism (Barro 1974; Journal of Political Economy 82, 1095–1117). Then, we show that this concept leads to interesting fiscal policy conclusions less clear‐cut and more realistic than those obtained with the two previous standard OLG models: a pay‐as‐you‐go social security is neutral but not a public debt.

Suggested Citation

  • Stéphane Lambrecht & Philippe Michel & Emmanuel Thibault, 2006. "Capital Accumulation and Fiscal Policy in an OLG Model with Family Altruism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(3), pages 465-486, August.
    • Handle: RePEc:bla:jpbect:v:8:y:2006:i:3:p:465-486
    DOI: 10.1111/j.1467-9779.2006.00273.x
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    More about this item

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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