Two-sided altruism as a motive for intergenerational transfer

Abstract

This paper reconsiders the role of altruism as a motive for an intergenerational transfer and characterizes the relationship between intergenerational transfers and altruism. The main finding is that transfers to children do not disappear even if altruism from parents to children weakens. The paper also shows that as altruism from children to parents becomes stronger, a transfer to children initially decreases and then increases once the degree of altruism is beyond a certain level; in other words, transfers may increase even if altruism from the transferee to the transferor becomes stronger. These findings sharply contrast with the common assumption in the existing literature that an intergenerational transfer is motivated by altruism from the transferor to the transferee.

Business Cycles in a Two-Sided Altruism Model

“…In this section, the fundamental results are demonstrated by specifying functional forms of the utility and production functions and characterizing the equilibrium dynamics in the model. As discussed by Fujiu and Yano [2], if the utility and production functions are characterized by the constant elasticity of substitution, an equilibrium is expressed as a sequence of linear policy functions; that is, in equilibrium, for every t ≥ 1, ξ t satisfies ξ t (y) = γ t y, γ t ∈ (0, 1), ∀y ≥ 0.…”

“…The degrees of altruism from each generation to its parental generation and to its descendant one are denoted by discount factors a and b, respectively. In this section, we examine each effect of a and b on the dynamic equation using the method by Fujiu and Yano [2] (they conducted a similar analysis in a two-sided altruism model with different conditions from this model).…”

“…In an infinite time horizon model in which each generation has an identical timeinconsistent preference, existing studies considered a sub-game perfect Nash equilibrium as an equilibrium concept and characterized it as a sequence consisting of each generation's policy function. In an overlapping generations model with intergenerational altruism, in which time inconsistency arises, recent studies revealed a condition under which each generation's policy function is linear, and found that its sequence is determined by a simple dynamical system (see the research of Fujiu and Yano [1,2]). This finding implies that generations may have different policy functions from each other.…”

“…Hori and Kanaya studied an overlapping generations model with two-sided altruism, under which each generation is altruistic to its parent and child generations (see [14][15][16]). Fujiu and Yano [2] found a dynamic equation determining a sequence of policy functions in equilibrium of a similar model. The present paper is fundamentally based on the model and extends the result in [2].…”

“…Fujiu and Yano [2] found a dynamic equation determining a sequence of policy functions in equilibrium of a similar model. The present paper is fundamentally based on the model and extends the result in [2].…”