On the long-run fluctuations of inheritance in two-sector OLG models
Florian Pelgrin (florian.pelgrin@edhec.edu) and
Alain Venditti
Additional contact information
Florian Pelgrin: EDHEC Business School, https://www.edhec.edu/fr/corps-professoral-et-chercheurs/pelgrin-florian-phd
No 2048, AMSE Working Papers from Aix-Marseille School of Economics, France
Abstract:
This paper provides a long-run cycle perspective to explain the behavior of the annual flow of inheritance as identified by Piketty [51] for France and Atkinson [3] for the UK. Using a two-sector Barro-type [9] OLG model with non-separable preferences and bequests, we show that endogenous fluctuations are likely to occur through period-2 cycles or Hopf bifurcations. Two key mechanisms, which can generate independently or together quasi-periodic cycles, can be identified as long as agents are sufficiently impatient. The first mechanism relies on the elasticity of intertemporal substitution or equivalently the sign of the cross-derivative of the utility function whereas the second rests on sectoral technologies through the sign of the capital intensity difference across two sectors. Furthermore, building on the quasi-palindromic nature of the degree-4 characteristic equation, we derive some meaningful sufficient conditions associated to the occurrence of complex roots in a two-sector OLG model. Finally, we show that our theoretical results are consistent with some empirical evidence for medium- and long-run swings in the inheritance flows as a fraction of national income in France over the period 1896-2008.
Keywords: two-sector overlapping generations model; optimal growth; endogenous fluctuations; quasi-palindromic polynomial; periodic and quasi-periodic cycles; altruism; bequest (search for similar items in EconPapers)
JEL-codes: C62 E32 O41 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2020-12
New Economics Papers: this item is included in nep-dge, nep-gro, nep-mac and nep-upt
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Related works:
Journal Article: On the long-run fluctuations of inheritance in two-sector OLG models (2022)
Working Paper: On the long-run fluctuations of inheritance in two-sector OLG models (2022)
Working Paper: On the long-run fluctuations of inheritance in two-sector OLG models (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:2048
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