Equilibrium indeterminacy with parental altruism

Equilibria where altruistic generations are linked via positive bequests are indeterminate and subject to sunspot variables when each individual's utility in non-separable in her own age contingent consumption and sufficiently biased towards old age. This result does not require strong income e...

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Bibliographic Details
Published inReview of economic dynamics Vol. 31; pp. 24 - 35
Main Author Reichlin, Pietro
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.01.2019
Subjects
Bequests
Indeterminacy
Overlapping generations
Parental altruism
Bequests
E10
E21
E32
Indeterminacy
Parental altruism
Overlapping generations
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ISSN1094-2025
1096-6099
DOI10.1016/j.red.2018.12.002

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Summary:Equilibria where altruistic generations are linked via positive bequests are indeterminate and subject to sunspot variables when each individual's utility in non-separable in her own age contingent consumption and sufficiently biased towards old age. This result does not require strong income effects and it applies if individuals select their own savings and bequests by taking the decisions of their offsprings and successors as given. In this case, the equivalence with the Dynastic Equilibria of a Ramsey-type model envisaged in Barro (1974) fails. To help interpreting my results I compare the olg cum altruism model with a canonical non-altruistic olg economy with two goods and age dependent per period utility functions.
ISSN:1094-2025
1096-6099
DOI:10.1016/j.red.2018.12.002