Family Altruism and Incentives

15 Pages Posted: 14 Apr 2005

See all articles by Roberta Gatti

Roberta Gatti

World Bank - Development Research Group (DECRG)

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Abstract

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.

Suggested Citation

Gatti, Roberta, Family Altruism and Incentives. Available at SSRN: https://ssrn.com/abstract=703312

Roberta Gatti (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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