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Altruistic bequests and non-negative savings

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  • Stéphane LAMBRECHT

    (Gremars and Université Charles-de-Gaulle Lille 3, CORE)

Abstract

This paper builds on the class of models studying the game interaction between an altruistic benefactor and a selfish recipient. An altruistic parent's bequest is transferred to his selfish son after the former's death and we assume that it is not a valid collateral for bank loans. This is equivalent to adding a non-negativity constraint on savings to the standard bequest model. A crucial mechanism at work is that the son's choice of a level of action can seriously dwarf his budget set. When Becker's resuit holds, the credit constraint places an upper bound on the strategie savings of the Samaritan's dilemma type. But the constraint on savings also causes the shrinkage of the validity domain of the Rotten Kid Theorem because it may lead both poor and rich heirs to behave unoptimally from the family point of view.

Suggested Citation

  • Stéphane LAMBRECHT, 2004. "Altruistic bequests and non-negative savings," Discussion Papers (REL - Recherches Economiques de Louvain) 2003041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:2003041
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    File URL: http://sites.uclouvain.be/econ/DP/REL/2003041.pdf
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    References listed on IDEAS

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    1. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-1093, Nov.-Dec..
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    5. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March.
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    8. Bernheim, B Douglas & Stark, Oded, 1988. "Altruism within the Family Reconsidered: Do Nice Guys Finish Last?," American Economic Review, American Economic Association, vol. 78(5), pages 1034-1045, December.
    9. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-1159, October.
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    Cited by:

    1. Bruno Decreuse & Bertrand Wigniolle, 2006. "Schizophrénie intergénérationnelle," Recherches économiques de Louvain, De Boeck Université, vol. 72(1), pages 49-74.
    2. Robert P. Rebelein, 2006. "Strategic Behavior, Debt Neutrality, and Crowding Out," Public Finance Review, , vol. 34(2), pages 148-172, March.
    3. Rebelein, Robert P., 2005. "Intergenerational Strategic Behavior and Crowding Out in a General Equilibrium Model," Vassar College Department of Economics Working Paper Series 74, Vassar College Department of Economics.

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    More about this item

    Keywords

    Altruism; Liquidity constraints;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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