PARENTAL ALTRUISM, LIFE EXPECTANCY, AND DYNAMICALLY INEFFICIENT EQUILIBRIA

Hippolyte d'Albis (1) , Bruno Decreuse (2)

1 LERNA - Economie des Ressources Naturelles
2 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

Macrodynamic models with finite life time and selfish individuals may feature (dynamically) inefficient equilibria, while models with infinite life time and altruistic individuals cannot. Do strong inter generational altruism and high life expectancy prevent the occurrence 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 favour over accumulation. 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.

Mots clés: Overlapping generations model; Productive capital; Dynamic (in)efficiency; Intergenerational altruism

Domaines: Economies et finances

Hippolyte d'Albis, Bruno Decreuse. PARENTAL ALTRUISM, LIFE EXPECTANCY, AND DYNAMICALLY INEFFICIENT EQUILIBRIA. 2007. ⟨halshs-00353112v1⟩