Cross-Dynastic Intergenerational Altruism

48 Pages Posted: 6 Apr 2020 Last revised: 20 Dec 2021

See all articles by Frikk Nesje

Frikk Nesje

University of Copenhagen - Department of Economics

Date Written: November 27, 2021

Abstract

I study whether saving behavior reveals socially relevant intertemporal preferences. To this end, I decompose the present generation's preference for the next into its dynastic and cross-dynastic components in a model of saving. If people are concerned about the next generation as such, then they might assign welfare weights on other dynasties. With such cross-dynastic intergenerational altruism, saving for one's descendants benefits present members of other dynasties. These preference externalities imply that socially relevant intertemporal preferences cannot be inferred from saving behavior. Numerically, I show that even "small" preferences for the next generation as such can lower the efficient discount rate by 20% to 40%, as compared to Nordhaus' calibration.

Keywords: Intergenerational altruism, social discounting, time-inconsistency, declining discount rates, generalized consumption Euler equations, interdependent utility, isolation paradox

JEL Classification: D64, D71, H43, Q01, Q54

Suggested Citation

Nesje, Frikk, Cross-Dynastic Intergenerational Altruism (November 27, 2021). Available at SSRN: https://ssrn.com/abstract=3549197 or http://dx.doi.org/10.2139/ssrn.3549197

Frikk Nesje (Contact Author)

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5, Bygn 26
Copenhagen, 1353
Denmark

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