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Thibault, Emmanuel
(2016)
Demonstration Effect and Dynamic Efficiency.
Economics Letters, 147.
pp. 42-45.
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Abstract
Can dynamic inefficiency be remedied by intergenerational family transfers? The issue matters for the connection between fiscal policy and economic growth. Yet family transfers have mostly been narrowly cast as altruistic. I show that an alternative motive the demonstration effect, whereby parents transfer to mold preferences of children can generate vastly different results: family transfers are positive under dynamic inefficiency. These transfers are instrumental to depress capital accumulation so as to approach the Golden Rule capital stock. Intuitively, family transfers from youth to old age reduce capital accumulation. However, family transfers are nil under dynamic efficiency. Unlike public debt, both capital accumulation and welfare are not worsened.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | October 2016 |
| Refereed: | Yes |
| Uncontrolled Keywords: | OLG model, Dynamic efficiency, Intergenerational family transfers |
| JEL Classification: | C62 - Existence and Stability Conditions of Equilibrium D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving O41 - One, Two, and Multisector Growth Models |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 01 Sep 2016 09:48 |
| Last Modified: | 02 Apr 2021 15:54 |
| OAI Identifier: | oai:tse-fr.eu:30652 |
| URI: | https://publications.ut-capitole.fr/id/eprint/22335 |
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Demonstration Effect and Dynamic Efficiency. (deposited 07 Jun 2016 07:55)
- Demonstration Effect and Dynamic Efficiency. (deposited 01 Sep 2016 09:48) [Currently Displayed]
