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Parental altruism, life expectancy and dynamically inefficient equilibria

Hippolyte d'Albis () and Bruno Decreuse ()

MPRA Paper from University Library of Munich, Germany

Abstract: Macrodynamic models with finite lifetime and selfish individuals may feature (dynamically) inefficient equilibria, while models with infinite lifetime and altruistic individuals cannot. Do strong intergenerational altruism and high life expectancy prevent the occurence of inefficient equilibria? To answer this question, we present a continuous time OLG model which generalizes the Blanchard-Buiter-Weil model. Our main innovation relies on the introduction of parental altruism, whose intensity is variable. We show that parental altruism and life expectancy actually favor overaccumulation. Theoretical results are illustrated by a parametrization from US data. Our numerical exercises suggest that the US economy is dynamically inefficient, mainly because life expectancy is sufficiently short.

Keywords: Overlapping generations model; Productive capital; Dynamic (in)efficiency; Intergenerational altruism (search for similar items in EconPapers)
JEL-codes: D61 D90 E21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-hea
Date: 2007-03
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Related works:
Journal Article: Parental altruism, life expectancy and dynamically inefficient equilibria (2009) Downloads
Working Paper: Parental Altruism, Life Expectancy and Dynamically Inefficient Equilibria (2009) Downloads
Working Paper: Parental altruism, life expectancy and dynamically inefficient equilibria (2007) Downloads
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