Opting out and topping up reconsidered: Informal care under uncertain altruism

We study the design of public long‐term care (LTC) insurance when the altruism of informal caregivers is uncertain. We consider non‐linear policies where the LTC transfer depends on the level of informal care, which is assumed to be observable, while children's altruism is not. Our policy encompasses two policies traditionally considered in the literature: topping up policies consisting of a transfer independent of informal care, and opting out policies entailing a positive transfer only if children fail to provide care. We show that both total and informal care should increase with the children's level of altruism. This is obtained under full and asymmetric information. Public LTC transfers, on the other hand, may be non‐monotonic. Under asymmetric information, public LTC transfers are lower than their full information level for the parents whose children are the least altruistic, while it is distorted upward for the highest level of altruism. This is explained by the need to provide incentives to highly altruistic children. In contrast to both topping up and opting out policies, the implementing contract is always such that social care increases with informal care.     

Capital Accumulation and Fiscal Policy in an OLG Model with Family Altruism

The idea of family altruism is that parents care only about their children's income and not about the use of this income made by the children. First, we establish dynamical properties which place the OLG model with family altruism halfway between the model with pure life‐cyclers ( Diamond 1965 ; American Economic Review 55, 1126–1150) and the one with dynastic altruism ( Barro 1974 ; Journal of Political Economy 82, 1095–1117). Then, we show that this concept leads to interesting fiscal policy conclusions less clear‐cut and more realistic than those obtained with the two previous standard OLG models: a pay‐as‐you‐go social security is neutral but not a public debt.     

Free Riding on Altruism and Group Size

It is shown that altruism does not affect the equilibrium provision of public goods although altruism takes the form of unconditional commitment to contribute. The reason is that altruistic contributions completely crowd out selfish voluntary contributions. That is, egoists free ride on altruism. It is also shown that public goods are less likely to be provided in larger groups. The only qualification to our results is when the probability of altruism is so high that it is a dominant strategy for all egoistic players to free ride. In this case, actually, both altruism and the larger group facilitate public good provision.     

Intergenerational transfers,demographic transition,and altruism: Problems in developing Asia

This paper develops a three‐period overlapping‐generations model where middle‐aged agents care about not only their own lifetime utility but also their old parents' and children's well‐being. The doubly altruistic agents choose amounts of intergenerational transfers to their old parents and children as well as private savings. The government specifies amounts of public transfers from working adults to the dependents. The model also takes the effects of demographic transition on the burdens of supporting the elderly and children into account. Using 23 countries' data from the National Transfer Accounts (NTA ), we estimate the degrees of filial and parental altruism and adjust them for their respective life expectancy and fertility rates. The findings suggest that people in developing countries are more parentally altruistic than those in developed ones while the adjusted degree of filial altruism tends to be low in developing Asia. Our welfare analyses reveal that the developing Asian countries must introduce more comprehensive public welfare programs for the elderly to maximize social welfare. Moreover, their low adjusted degree of filial altruism may trap the developing Asian countries at the low levels of public old‐age support and social welfare as the further demographic transition ensues.     

Family Altruism and Incentives

This paper characterizes the pattern of intergenerational transfers that emerges in an altruistic model of the family when children's effort is explicitly made endogenous and parents have imperfect information on the stochastic income realizations of their children. It is shown 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. In this context, Ricardian equivalence holds whenever non‐negativity constraints are not binding.     

Public pensions and growth

This paper investigates the relationship between the size of an unfunded public pension system and economic growth in an overlapping generation economy, in which altruistic parents finance the education of their children and leave bequests. Unlike the existing literature, we model intergenerational altruism by assuming that children's income during adulthood is an argument of parental utility. Unfunded public pensions can promote growth when families face liquidity constraints preventing them from investing optimally in the education of their children. We consider two alternative ways of financing a public pension system, either by levying social contributions in a lump-sum manner or in proportion to labour income. We find that there is no case for unfunded public pensions in economies where bequests are operative. By contrast, there exists a growth-maximising size of the public pension system in economies where bequests are not operative and individuals are sufficiently patient.     

Intrinsic Motivations of Public Sector Employees: Evidence for Germany

We examine differences in altruism and laziness between public sector employees and private sector employees. Our theoretical model predicts that the likelihood of public sector employment increases with a worker's altruism, and increases or decreases with a worker's laziness depending on his altruism. Using questionnaire data from the German Socio‐Economic Panel Study, we find that public sector employees are significantly more altruistic and lazy than observationally equivalent private sector employees. A series of robustness checks show that these patterns are stronger among higher educated workers; that the sorting of altruistic people to the public sector takes place only within the caring industries; and that the difference in altruism is already present at the start of people's career, while the difference in laziness is only present for employees with sufficiently long work experience.     

Social Security and Growth in an Altruistic Economy

This paper studies the macroeconomic impact of private and public intergenerational transfers in the presence of endogenous growth. It focuses on two-sided altruism implying that individuals have both a motive to make gifts to their parents and a motive to leave bequests to their children. The growth effects of social security depend on whether children are making gifts to their parents or parents are leaving bequests to their children. Which of the transfers is operative, in turn, depends on the size of social security benefits. Social security is legislated endogenously. The introduction of a social security program which definitely reduces per capita income growth and harms future generations is contemplated by altruistic individuals even if non-altruistic individuals disapprove it.     

Optimal long-term care policy in an intergenerational exchange setting

We examine the optimality of public long-term care policy, incorporating an exchange game between elderly parents and adult children and transfer-seeking competition among siblings, instead of children's altruism. Results reveal that when children compete to obtain more valuable bequests from parents in exchange for elderly care, public long-term care policy is optimal if government can provide long-term care more efficiently than children can, thereby reducing parental bequests, possibly to zero. This is likely to be the case when children's wages are high. Formal long-term care might not be necessary if parents can receive adequate informal care in exchange for bequests to children with low wages.     

Capital Income Taxation,Economic Growth and Heterogeneity in the Motivation to Give

This study provides a comprehensive analysis of the relationship between capital income taxation and economic growth within an overlapping generations model when individuals may bequeath wealth. The altruistic concern is modeled as a synthesis of joy‐of‐giving and family altruism so that individuals may derive utility from the amount of bequest itself and by providing children with a disposable income later on in life. Using this framework, it is shown that, in contrast to the existing literature, increasing the capital income tax rate may well enhance growth under operative bequests.     

Heterogeneous Dynasties and the Political Economy of Public Debt

We consider a small open overlapping generations economy with descending altruism. Heterogeneity is introduced by assuming that each parent procreates a fixed proportion of selfish children. Altruistic parents can recognize the type of each child. There is no Ricardian equivalence and an active public intergenerational transfer policy is attractive to altruistic dynasty members, although there may be no unanimity among them. We display reasonable conditions for indirect preferences to be single-peaked and we apply the median voter theorem. We then describe political equilibrium paths and discuss their compatibility with the steady path of an underlying closed economy with autonomous labor productivity growth.
JEL classification : D 31; D 64; D 72; D 91; H 63     

Malnutrition and Child Labor

In pre‐industrial and developing economies, it is common to find (i) entire families, including children, working together in family farms or urban factories; and (ii) a positive link between a person's consumption and her productivity. This paper argues that there is a natural reason for the concurrence of (i) and (ii). As a rule, households are characterized by intra‐household altruism: an increase in the income of an individual increases the consumption of all household members. Hence, when an employer pays an adult worker a high wage to enhance her productivity, part of it ends up augmenting her children's consumption and productivity. One way for the employer to prevent this leakage and internalize the externality is to employ the children as well. This explains the higher incidence of family labor in poor societies where (ii) is more likely to be true.     

ALTRUISM,EGOISM, AND THE ROLE OF SOCIAL CAPITAL IN THE PRIVATE PROVISION OF PUBLIC GOODS*

The economic approach to understanding human behavior has encountered serious difficulties when attempting to explain the private provision of public goods, such as voting and charitable contributions to large organizations. To gain insights into these important issues, this study takes an interdisciplinary approach. The individual is modeled formally in terms of dual egoistic/altruistic utilities, and the recursive relation between altruism and the existence and production of social capital is developed. The model is analyzed as a non-cooperative game between the egoistic and altruistic selves. The socialized rational actor that results from the combination of social capital, dual utilities, and non-cooperative behavior resolves a number of public goods paradoxes. Comparative statics and the dynamics of social capital formation are explored.     

Long‐term care policy with lazy rotten kids

This paper studies the determination of informal long‐term care (LTC) provided by children in a scenario which is somewhere in between perfect altruism and selfish exchanges. Parents are altruistic but children are purely selfish, and neither side can make credible commitments. The model is based on Becker's “rotten kid” specification except that it explicitly accounts for the sequence of decisions. In Becker's world, with a single good efficiency is achieved. We show that when family aid is introduced the outcome is likely to be inefficient. Still, the rotten kid mechanism is at work and ensures that a positive level of LTC is provided as long as the bequest motive is operative. We identify the inefficiencies by comparing the laissez‐faire (subgame perfect) equilibrium to the first‐best allocation. We first assume that families are identical ex ante and then consider the case where dynasties differ in wealth. We study how the provision of LTC can be improved by public policies. Interestingly, crowding out of private aid by public LTC is not a problem in this setting. With an operative bequest motive, public LTC will have no impact on private aid. More amazingly still, when the bequest motive is (initially) not operative, public insurance may even enhance the provision of informal aid.     

Public Goods Games,Altruism, and Evolution

I analyze the evolution of altruistic preferences in a population where individuals are matched pairwise to play a one‐shot public goods game. I determine the evolutionarily stable degree of altruism, allowing for assortative matching. The stable degree of altruism is strictly smaller than the degree of assortativity. In particular, if matching is completely random, spite is stable, and a positive degree of assortativity is necessary for pure selfishness to be stable. Furthermore, the stable degree of altruism is increasing in the degree of assortativity, and it depends on the specifics of the public goods game.     

Self-enforcing exchange among generations: Implications for consumption and mobility

A three-generation OLG model with one-directional altruism and two-directional intra-family transfers is presented. Adults invest in their children's education and make transfers to their elderly parents. However, due to lack of altruism, adults with high earnings do not share consumption equally with their elderly parents but spend a larger share of their earnings on own consumption and on their children's education. This allows the model to be consistent with three empirical observations that are difficult to reconcile with traditional altruistic frameworks of intergenerational social interactions and mobility: (i) consumption is not perfectly shared between members of an extended family, (ii) consumption is not equally persistent over the lifecycle as across generations, and (iii) the intergenerational persistence of earnings is particularly high at the top end of the earnings distribution.     

Donor Altruism and the Transfer Paradox in an Overlapping Generations Model

This paper examines the transfer problem between two countries when a donor exhibits altruistic utility toward a recipient in a one‐sector overlapping generations model. We demonstrate that if the donor has a larger marginal propensity to save than the recipient, the donor's altruism never contributes to donor enrichment irrespective of the degree of the donor's altruism. Donor enrichment occurs only if the donor has a smaller marginal propensity to save and a sufficiently high level of altruism. These findings imply that the altruism of a donor toward a recipient does not necessarily explain the motivation to voluntarily provide a transfer.     

Caring and family income

This paper extends Becker's theory of altruism in the family to social interactions in the workplace, using motives measured by social psychologists. Altruism in the family is measured by a transfer of money income to the spouse which is motivated by affiliation. Data from the first nationwide survey of TAT-measured personality dispositions are used to show that a head of household with children maximizes family income only if he is motivated by affiliation towards his wife and has a stronger motive for power than affiliation in managerial situations. Additional motive patterns are found which account for significant differences in family income.     

INTERGENERATIONAL PUBLIC GOODS: TRANSNATIONAL CONSIDERATIONS

This paper analyzes public goods whose benefits cross countries' borders and generations. Once provided, transnational intergenerational public goods (TIPGs) are assets that generate benefits for subsequent generations. For treaties involving TIPGs, a coalition of rich developed countries are apt to shoulder more of the provision burden than a coalition of poor developing countries. This burden inequality worsens if the developed countries unilaterally display altruism to future generations; nevertheless, altruistic benefits may offset reduced spillovers. When current generations strategize with respect to future generations, provision and efficiency suffer; however, the hypothesized unequal burden sharing improves somewhat. For alternative aggregator technologies of public supply, these one-sided burdens may be partly ameliorated.     

Optimal contracting with altruism and reciprocity

Motivated by the recent experimental evidence on altruistic behavior, we study a simple principal–agent model where each player cares about other players' utility, and may reciprocate their attitude towards him. We show that, relative to the selfish benchmark, efficiency improves when players are altruistic. Nevertheless, in contrast to what may be expected, an increase in the degree of the agent's altruism as well as a more reciprocal behavior by players has ambiguous effects on efficiency. We also consider the effects of the presence of spiteful players and discuss how monetary transfers between players depend on their degrees of altruism and spitefulness.