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Intergenerational Transfers Economic Growth and Income Distribution

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  • Zilcha, Itzhak

Abstract

We consider an Overlapping-generations economy where the aggregative production process uses physical capital and human capital. The human capital level of each individual is determined by the direct investment in education and some random "ability". The parents' investment in the education of their offspring is motivated by altruism. We distinguish between two types of transfers: Investment of parents in the education of their offspring, which affects her future income, and the direct capital transfer (the 'bequest motive). We show that the intensity of each type of altruism plays an important role on the equilibrium growth and the income distributions, but the results differ significantly. Comparing competitive equilibria from the same initial capital and human capital distributions we derive the following results: (a) When altruism is more 'education-inclined', then economic growth is higher and the intragenerational income distributions are more equal (less equal), in all periods, if the aggregate production function's elasticity of substitution is larger (smaller) than 1; (b) When altruism is more 'bequestinclined', the growth rate is lower and the impact on the intragenerational distributions of income depends on the size of the elasticity of substitution. Public provision of education (financed by taxing wage incomes) reverses the results in (b).

Suggested Citation

  • Zilcha, Itzhak, 1996. "Intergenerational Transfers Economic Growth and Income Distribution," Foerder Institute for Economic Research Working Papers 275619, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275619
    DOI: 10.22004/ag.econ.275619
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    References listed on IDEAS

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    Cited by:

    1. Ana I. Moro-Egido, 2004. "Educational System, Altruism and Inequality in the Distribution of Income," Economic Working Papers at Centro de Estudios Andaluces E2004/46, Centro de Estudios Andaluces.

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    More about this item

    Keywords

    Financial Economics; Labor and Human Capital;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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