Conflicts within Economic Dynasties: Selfishness versus Descending Altruism
Anyone interested in the national debt-social security nexus is likely to realise that these public policy questions cannot be separated from the matter of private intergenerational transfers. The Diamond (1965) overlapping generation model and the Arrow-Kurz (1970) modified Ramsey model are two benchmarks in the literature dealing with these topics, an essential part of which has been neatly surveyed by Masson and Pestieau (1997). They are prominent representatives of two distinct traditions: in the former, parents are not concerned with their children’s welfare from the point when they become adults, whereas in the latter, continuing concern for every single descendant, however distant, is represented by weighted utilitarianism. Exponentially declining weights express the intensity of a parent’s altruism towards their descendants.
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