Family Altruism and Incentives

The author builds on the altruistic model of the family, to explore the strategic interaction between altruistic parents, and selfish children, when children's efforts are endogenous. If there is uncertainty about the amount of income the chil...

Full description

Bibliographic Details
Main Author:	Gatti, Roberta
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ASYMMETRIC INFORMATION ATTENTION BENCHMARK BUDGET CONSTRAINTS COMMON GOOD CONFLICT DEBT DEMOGRAPHICS DIRECTIONAL FLOW ECONOMIC PERFORMANCE ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EXPECTED UTILITY GENDER IMPERFECT INFORMATION INCOME INHERITANCE INSURANCE INTERGENERATIONAL TRANSFERS LOW INCOME MACROECONOMICS MARGINAL COST MARGINAL UTILITY MORAL HAZARD MULTIPLIERS PARTIAL INSURANCE POLICY RESEARCH POLITICAL ECONOMY POOR PRIVATE TRANSFERS RESOURCE ALLOCATION UTILITY FUNCTION
Online Access:	http://documents.worldbank.org/curated/en/2000/12/828301/family-altruism-incentives http://hdl.handle.net/10986/19740

id	okr-10986-19740
recordtype	oai_dc
spelling	okr-10986-197402021-04-23T14:03:44Z Family Altruism and Incentives Gatti, Roberta ASYMMETRIC INFORMATION ATTENTION BENCHMARK BUDGET CONSTRAINTS COMMON GOOD CONFLICT DEBT DEMOGRAPHICS DIRECTIONAL FLOW ECONOMIC PERFORMANCE ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EXPECTED UTILITY GENDER IMPERFECT INFORMATION INCOME INHERITANCE INSURANCE INTERGENERATIONAL TRANSFERS LOW INCOME MACROECONOMICS MARGINAL COST MARGINAL UTILITY MORAL HAZARD MULTIPLIERS PARTIAL INSURANCE POLICY RESEARCH POLITICAL ECONOMY POOR PRIVATE TRANSFERS RESOURCE ALLOCATION UTILITY FUNCTION The author builds on the altruistic model of the family, to explore the strategic interaction between altruistic parents, and selfish children, when children's efforts are endogenous. If there is uncertainty about the amount of income the children will realize, and if parents have imperfect information, the children have an incentive to exert little effort, and to rely on their parent's altruistically motivated transfers. Because of this, parents face a tradeoff between the insurance that bequests implicitly provide their children, and the disincentive to work prompted by their altruism. The author shows 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. Alternatively, parents may choose to forgo any insurance, and offer a fixed level of bequest, to elicit greater effort from their children. The optimal transfers structure that the author derives, reconciles the predictions of the altruistic family model, with much of the existing evidence on inter-generational transfers, which suggests that parents compensate only partially, or not at all, for earnings differentials among their children. Moreover, the author shows that Ricardian equivalence holds in this setup, except when non-negativity constraints are binding. 2014-08-26T21:56:52Z 2014-08-26T21:56:52Z 2000-12 http://documents.worldbank.org/curated/en/2000/12/828301/family-altruism-incentives http://hdl.handle.net/10986/19740 English en_US Policy Research Working Paper;No. 2505 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ASYMMETRIC INFORMATION ATTENTION BENCHMARK BUDGET CONSTRAINTS COMMON GOOD CONFLICT DEBT DEMOGRAPHICS DIRECTIONAL FLOW ECONOMIC PERFORMANCE ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EXPECTED UTILITY GENDER IMPERFECT INFORMATION INCOME INHERITANCE INSURANCE INTERGENERATIONAL TRANSFERS LOW INCOME MACROECONOMICS MARGINAL COST MARGINAL UTILITY MORAL HAZARD MULTIPLIERS PARTIAL INSURANCE POLICY RESEARCH POLITICAL ECONOMY POOR PRIVATE TRANSFERS RESOURCE ALLOCATION UTILITY FUNCTION
spellingShingle	ASYMMETRIC INFORMATION ATTENTION BENCHMARK BUDGET CONSTRAINTS COMMON GOOD CONFLICT DEBT DEMOGRAPHICS DIRECTIONAL FLOW ECONOMIC PERFORMANCE ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EXPECTED UTILITY GENDER IMPERFECT INFORMATION INCOME INHERITANCE INSURANCE INTERGENERATIONAL TRANSFERS LOW INCOME MACROECONOMICS MARGINAL COST MARGINAL UTILITY MORAL HAZARD MULTIPLIERS PARTIAL INSURANCE POLICY RESEARCH POLITICAL ECONOMY POOR PRIVATE TRANSFERS RESOURCE ALLOCATION UTILITY FUNCTION Gatti, Roberta Family Altruism and Incentives
relation	Policy Research Working Paper;No. 2505
description	The author builds on the altruistic model of the family, to explore the strategic interaction between altruistic parents, and selfish children, when children's efforts are endogenous. If there is uncertainty about the amount of income the children will realize, and if parents have imperfect information, the children have an incentive to exert little effort, and to rely on their parent's altruistically motivated transfers. Because of this, parents face a tradeoff between the insurance that bequests implicitly provide their children, and the disincentive to work prompted by their altruism. The author shows 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. Alternatively, parents may choose to forgo any insurance, and offer a fixed level of bequest, to elicit greater effort from their children. The optimal transfers structure that the author derives, reconciles the predictions of the altruistic family model, with much of the existing evidence on inter-generational transfers, which suggests that parents compensate only partially, or not at all, for earnings differentials among their children. Moreover, the author shows that Ricardian equivalence holds in this setup, except when non-negativity constraints are binding.
format	Publications & Research :: Policy Research Working Paper
author	Gatti, Roberta
author_facet	Gatti, Roberta
author_sort	Gatti, Roberta
title	Family Altruism and Incentives
title_short	Family Altruism and Incentives
title_full	Family Altruism and Incentives
title_fullStr	Family Altruism and Incentives
title_full_unstemmed	Family Altruism and Incentives
title_sort	family altruism and incentives
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2000/12/828301/family-altruism-incentives http://hdl.handle.net/10986/19740
_version_	1764440507954495488

Family Altruism and Incentives

Similar Items