Government Transfers and the Samaritan's Dilemma in the Family

Ritsuko Futagami, Kimiyoshi Kamada () and Takashi Sato

Public Choice, 2004, vol. 118, issue 1_2, 77-86

Abstract: This paper examines the effectiveness of government transfers in overcoming the Samaritan's dilemma in a family in which the child saves an insufficient amount in order to induce larger bequests from the parent. The results are as follows. First, exogenous government transfers do not affect intergenerational consumption allocation if bequests are operative. Second, assuming that government transfers are chosen strategically, the government precommits to such a level of transfers from the parent to the child that bequests become inoperative, and thus rids the child of the incentive for undersaving. This engenders an efficient intertemporal allocation of consumption.

Date: 2004
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