Click here for search results
Family altruism and incentives, Volume 1
Author:Gatti, Roberta; Date Stored:2001/01/20
Document Date:2000/12/31Document Type:Policy Research Working Paper
SubTopics:Economic Theory & Research; Educational Sciences; Health Economics & Finance; Safety Nets and Transfers; Environmental Economics & PoliciesLanguage:English
Major Sector:(Historic)Economic PolicyReport Number:WPS2505
Sub Sectors:Macro/Non-TradeCollection Title:Policy, Research working paper ; no. WPS 2505
Volume No:1  

Summary: The author builds on the altruistic model of the family, to explore the strategic interaction between altruistic parents, and selfish children, when children's efforts are endogenous. If there is uncertainty about the amount of income the children will realize, and if parents have imperfect information, the children have an incentive to exert little effort, and to rely on their parent's altruistically motivated transfers. Because of this, parents face a tradeoff between the insurance that bequests implicitly provide their children, and the disincentive to work prompted by their altruism. The author shows that if parents can credibly commit to a pattern of transfers, they will choose not to compensate children in bad outcomes, as much as predicted by the standard (no uncertainty, no asymmetric information) dynastic model of the family. Alternatively, parents may choose to forgo any insurance, and offer a fixed level of bequest, to elicit greater effort from their children. The optimal transfers structure that the author derives, reconciles the predictions of the altruistic family model, with much of the existing evidence on inter-generational transfers, which suggests that parents compensate only partially, or not at all, for earnings differentials among their children. Moreover, the author shows that Ricardian equivalence holds in this setup, except when non-negativity constraints are binding.

Official Documents
Official, scanned versions of documents (may include signatures, etc.)
File TypeDescriptionFile Size (mb)
PDF 44 pagesOfficial version*3.08 (approx.)
TextText version**
How To Order
Light-Weight Documents
Lighter (less MB) documents which may or may not be the final, official version
File TypeDescriptionFile Size (mb)
PDF 38 pagesWPS25050.19

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.
** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: