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| Author: | Fan, C. S. |
| Title: | A model of intergenerational transfers |
| Journal: | Economic Theory
2001 : VOL. 17:2, p. 399-418 |
| Index terms: | INTERGENERATIONAL TRANSFERS MARKOV CHAINS LIFE CYCLES EQUILIBRIUM ANALYSIS |
| Language: | eng |
| Abstract: | This paper formalizes the idea that intergenerational transfers occur because people care about the "characteristics" (i.e. quantity and quality) of their offspring, rather than their children's welfare per se or consumption. The model analyzes this transfer motive in an infinite Markovian game framework, and it proves the existence of a stationary Markov Perfect equilibrium. Further, the analysis shows that under certain conditions, the proposed transfer motive will diminish, as the average income of an economy is sufficiently high. Thus, it suggests that as incomes continue to rise beyond a certain level, the (extended) life-cycle hypothesis will likely be a better and better approximation for explaining most people's saving behaviour. |
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