Rational bubbles in altruistic economies: when Tirole meets Ramsey

Stefano Bosi (), Thai Ha-Huy and Ngoc-Sang Pham
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Stefano Bosi: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne

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Abstract: We consider an overlapping generations model a la Tirole (1985) augmented with altruism from parents to children as in Barro (1974). We compute the global dynamics and we show that, in the case of low altruism, bequests are zero and our model works exactly as the Tirole's model (1985) where rational bubbles can arise, while, in the case of high altruism, bequests are positive and bubbles are ruled out. This result holds whatever the share of altruistic agents in total population. Our contribution raises the question of the robustness of Tirole's conclusion about the existence of rational bubbles under a large degree of altruism.

Date: 2019
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Citations: View citations in EconPapers (3)

Published in Economics Bulletin, 2019, 39, pp.816+

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Journal Article: Rational bubbles in altruistic economies: when Tirole meets Ramsey (2019)
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