Welfare-enhancing parental altruism and children’s habit formation

Lin Zhang and Shinsuke Ikeda

International Review of Economics, 2016, vol. 63, issue 3, No 5, 303 pages

Abstract: Abstract We propose a model of parental altruism in relation to children’s habit formation, as children are unaware of their developing habits while young and only become cognizant with age. We show that an altruistic mother (1) maintains the amount of income transferred to her child lower than the child would desire and (2) reduces further income transfer upon an exogenous increase in case of a particular negative habit of the child. The child, when grown, may end up being grateful for the small income transfer if the mother is sufficiently altruistic and has a relatively high income: When evaluated by the realized habitual preferences, a small income transfer leads to greater welfare. This implies that parents from richer families tend to appreciate the authoritative parenting practice.

Keywords: Habit formation; Parental altruism; Welfare-enhancing; Time preference (search for similar items in EconPapers)
JEL-codes: D10 D60 D91 J13 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s12232-016-0255-2

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