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Rational bubbles in altruistic economies: when Tirole meets Ramsey

Author

Listed:
  • Stefano Bosi

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

  • Thai Ha-Huy

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

  • Ngoc-Sang Pham

    (Montpellier Business School)

Abstract

We consider an overlapping generations model a la Tirole (1985) augmented with altruism from parents to children as in Barro (1974). We compute the global dynamics and we show that, in the case of low altruism, bequests are zero and our model works exactly as the Tirole's model (1985) where rational bubbles can arise, while, in the case of high altruism, bequests are positive and bubbles are ruled out. This result holds whatever the share of altruistic agents in total population. Our contribution raises the question of the robustness of Tirole's conclusion about the existence of rational bubbles under a large degree of altruism.

Suggested Citation

  • Stefano Bosi & Thai Ha-Huy & Ngoc-Sang Pham, 2019. "Rational bubbles in altruistic economies: when Tirole meets Ramsey," Post-Print hal-02878050, HAL.
    • Handle: RePEc:hal:journl:hal-02878050
    Note: View the original document on HAL open archive server: https://hal.science/hal-02878050
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    References listed on IDEAS

    as
    1. Bosi, Stefano & Van, Cuong Le & Pham, Ngoc-Sang, 2018. "Intertemporal equilibrium with heterogeneous agents, endogenous dividends and collateral constraints," Journal of Mathematical Economics, Elsevier, vol. 76(C), pages 1-20.
    2. Manuel S. Santos & Michael Woodford, 1997. "Rational Asset Pricing Bubbles," Econometrica, Econometric Society, vol. 65(1), pages 19-58, January.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. Bosi, Stefano & Ha-Huy, Thai & Le Van, Cuong & Pham, Cao-Tung & Pham, Ngoc-Sang, 2018. "Financial bubbles and capital accumulation in altruistic economies," Journal of Mathematical Economics, Elsevier, vol. 75(C), pages 125-139.
    5. Nourry, Carine & Venditti, Alain, 2001. "Determinacy of Equilibrium in an Overlapping Generations Model with Heterogeneous Agents," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 230-255, January.
    6. Barro, Robert J & Becker, Gary S, 1989. "Fertility Choice in a Model of Economic Growth," Econometrica, Econometric Society, vol. 57(2), pages 481-501, March.
    7. Fernando Alvarez & Urban J. Jermann, 2000. "Efficiency, Equilibrium, and Asset Pricing with Risk of Default," Econometrica, Econometric Society, vol. 68(4), pages 775-798, July.
    8. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
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    Cited by:

    1. Stefano Bosi & Thai Ha‐Huy & Cao‐Tung Pham & Ngoc‐Sang Pham, 2022. "Ascendant altruism and asset price bubbles," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 532-551, December.

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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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