Two-sided altruism, Lindahl Equilibrium, and Pareto Optimality in Overlapping Generations Models

Lakshmi Raut ()

GE, Growth, Math methods from University Library of Munich, Germany

Abstract: The paper extends the Samuelsonian overlapping generations framework to encompass a variety of altruistic preferences, recasting it into a Lindahl equilibrium framework. It has been shown that altruism towards parents provides an alternative answer to the basic question of capital theory as to why interest rates are positive; the Lindahl equilibrium obeys the First and the Second Welfare theorems with respect to the Malinvaud optimality criterion but not the Pareto optimality criterion. A complete characterization of Pareto optimal allocations is provided using Lindahl equilibrium prices. It is shown that a sufficiently strong altruism towards parents can change a Pareto inefficient Samuelsonian economy with negative interest rate to an efficient classical economy with positive interest rate. Based on Sen's meta ranking concept, the paper proposes an ethical principle to supplement the equilibrium theory for guiding agents in their choice of the degree of altruism towards their parents.

Keywords: Altruism; Lindahl equilibrium; Overlapping generations model; Two-sided altruism (search for similar items in EconPapers)
JEL-codes: D51 D62 D64 D9 (search for similar items in EconPapers)
Pages: 17 pages
Date: 1996-04-04
New Economics Papers: this item is included in nep-mic and nep-pub
Note: Type of Document - Postscript; prepared on IBM PC - PC-TEX; to print on PostScript; pages: 17; figures: included. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Two-sided altruism, Lindahl equilibrium, and Pareto optimality in overlapping generations models (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpge:9604001

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