EconPapers    
Economics at your fingertips  
 

Hyperbolic discounting in an intergenerational model with altruistic parents

Jia Cao () and Minghao Li ()
Additional contact information
Jia Cao: Renmin University of China
Minghao Li: New Mexico State University

Journal of Population Economics, 2022, vol. 35, issue 3, No 6, 989-1005

Abstract: Abstract Hyperbolic utility discounting has emerged as a leading alternative to exponential discounting because it can explain time-inconsistent behaviors. Intuitively, hyperbolic discounting should play a crucial role in intergenerational models characterized by intertemporal trade-offs. In this paper, we incorporate hyperbolic discounting into a dynamic model in which parents are altruistic towards their children. Agents live for four periods and choose levels of consumption, fertility, investment in their children’s human capital, and bequests to maximize discounted utility. In the steady state, hyperbolic discounting decreases fertility, increases human capital investment, and shifts consumption towards younger ages. These effects are more pronounced in the time-consistent problem (in which agents cannot commit to a course of action) than in the commitment problem, which can be interpreted as realized and intended actions, respectively. The preference-based discrepancy between intended fertility and realized fertility has important implications for the empirical literature that compares the two.

Keywords: Hyperbolic discounting; Fertility; Human capital; Intergenerational model (search for similar items in EconPapers)
JEL-codes: C61 D14 I21 J11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s00148-021-00824-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jopoec:v:35:y:2022:i:3:d:10.1007_s00148-021-00824-7

Ordering information: This journal article can be ordered from
http://www.springer. ... tion/journal/148/PS2

DOI: 10.1007/s00148-021-00824-7

Access Statistics for this article

Journal of Population Economics is currently edited by K.F. Zimmermann

More articles in Journal of Population Economics from Springer, European Society for Population Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2022-07-09
Handle: RePEc:spr:jopoec:v:35:y:2022:i:3:d:10.1007_s00148-021-00824-7