Discussion Paper Details

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Title: Equilibrium Indeterminacy with Parental Altruism

Author(s): Pietro Reichlin

Publication Date: March 2018

Keyword(s): Bequets, Indeterminacy and parental altruism

Programme Area(s): Macroeconomics and Growth and Monetary Economics and Fluctuations

Abstract: Equilibria where altruistic generations are linked via positive bequests are indeterminate and subject to sunspot variables when each individual's utility in non-separable in her own age contingent consumption and sufficiently biased towards old age. This result does not require strong income effects and it applies if individuals select their own savings and bequests by taking the decisions of their offsprings and successors as given. In this case, the equivalence with the Dynastic Equilibria of a Ramsey-type model envisaged in Barro (1974) fails. I show that the structure of equilibria of the olg model with altruism is more similar to the one generated in a canonical olg economy with two goods.

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Bibliographic Reference

Reichlin, P. 2018. 'Equilibrium Indeterminacy with Parental Altruism'. London, Centre for Economic Policy Research.