Abstract
This chapter develops and studies a tough love model of intergenerational altruism. We model tough love by modifying the Barro-Becker standard altruism model in two ways. First, the child's discount factor is endogenously determined, so lower childhood consumption leads to a higher discount factor later in life. Second, the parent evaluates the child's lifetime utility with a constant high discount factor. Our model predicts that parental transfers will fall when the child's discount factor falls. This is in contrast with the standard altruism model, which predicts that parental transfers are independent of exogenous changes in the child's discount factor.
| Original language | English |
|---|---|
| Title of host publication | Behavioral Interactions, Markets, and Economic Dynamics |
| Subtitle of host publication | Topics in Behavioral Economics |
| Publisher | Springer Japan |
| Pages | 43-78 |
| Number of pages | 36 |
| ISBN (Electronic) | 9784431555018 |
| ISBN (Print) | 9784431555001 |
| DOIs | |
| Publication status | Published - 2015 Sept 12 |
Keywords
- Endogenous time discounting
- Parenting
- Tough love
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Business, Management and Accounting(all)
- Psychology(all)