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The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice

Juan Cordoba and Marla Ripoll ()

Review of Economic Studies, 2019, vol. 86, issue 5, 1935-1972

Abstract: Dynastic models common in macroeconomics use a single parameter to control the willingness of individuals to substitute consumption both intertemporally, or across periods, and intergenerationally, or across parents and their children. This article defines the concept of elasticity of intergenerational substitution (EGS), and extends a standard dynastic model in order to disentangle the EGS from the EIS, or elasticity of intertemporal substitution. A calibrated version of the model lends strong support to the notion that the EGS is significantly larger than one. In contrast, estimates of the EIS suggests that it is at most one. What disciplines the identification is the need to match empirically plausible fertility rates for the U.S. We illustrate the potential role of the EGS in macroeconomics.

Keywords: Altruism; Non-separable utility; Intertemporal substitution; Intergenerational substitution; Economic value of a child (search for similar items in EconPapers)
JEL-codes: D10 D64 D91 J13 (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice (2018) Downloads
Working Paper: The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice (2017) Downloads
Working Paper: The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice (2014) Downloads
Working Paper: The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice (2014) Downloads
Working Paper: The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice (2014) Downloads
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