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  1. 1
    301704

    Human capital, heterogeneity, and the estimation of degrees of intergenerational mobility.

    Han S; Mulligan CB

    Chicago, Illinois, University of Chicago, Population Research Center, 1997. 38 p. (Population Research Center Discussion Paper Series No. 97-3)

    Some of the important implications of the parental investment model of intergenerational mobility have been derived under the assumption that parental income is the only source of heterogeneity. We explicitly model the variability and inheritability of "innate" earnings ability and variability of tastes (altruism rates) and show how this heterogeneity affects the observed intergenerational consumption and earnings mobility. Three main analytic and simulated results are found. First, heterogeneity reduces the observed differences in the predictions on degrees of intergenerational mobility by different models. Second, when the elasticity of substitution between parents' and child's consumption is smaller than 1, imperfect capital market models and permanent income models are practically indistinguishable in terms of OLS estimates of degrees of consumption mobility. In terms of observed earning mobility, the empirical usefulness of the imperfect capital markets model decreases with the elasticity of substitution between parents' and child's consumption. Third, mechanical models tend to overestimate the degrees of consumption persistence and underestimate the degrees of earning persistence for poorer families. The problem of misspecification of mechanical models is not serious in estimating the degrees of intergeneration mobility of both consumption and earnings for richer families. (author's)
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  2. 2
    282313

    Saving and endogenous growth: a survey of theory and policy.

    Buiter WH

    New Haven, Connecticut, Yale University, Economic Growth Center, 1991 Sep. 58 p. (Center Discussion Paper No. 642)

    The paper surveys and extends recent results on the effect of changes in government fiscal and financial policy and in private savings behavior on economic growth. Private saving behavior is represented by an OLG model. The supply side of the model permits endogenous growth through aggregate constant returns to an augmentable input. Private sector behavior is parameterized with the time preference rate, the intertemporal elasticity of substitution, the birth rate, the death rate and the rate at which labor productivity declines with age. Fiscal instruments include public consumption spending, the capital income tax rate, deficit financing and balanced-budget intergenerational redistribution (an unfunded social security retirement scheme). (author's)
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  3. 3
    282312

    The timing of government spending in a dynamic model of imperfect competition.

    Sala-i-Martin X

    New Haven, Connecticut, Yale University, Economic Growth Center, 1991 Aug. 34 p. (Center Discussion Paper No. 641)

    The debate on macroeconomic implications of fiscal policy has focused on the question of whether the timing of taxes matters but has neglected the study of the relevance of the timing of public spending. This paper tries to fill that hole by presenting a model of dynamic fiscal policy where firms behave non competitively and households have finite horizons. I show that the existence of monopoly rents makes the timing of future government spending relevant. In particular I show that, contrary to the prediction of most other models of fiscal policy, an anticipated increase in public spending financed by subsequent tax increases may have expansionary effects as the positive wealth effect associated with monopoly rents outweights the negative wealth effect of anticipated higher taxes. I also show that if the public spending expansion is financed by subsequent public spending contraction, the experiment has unambiguous expansionary effects. The model presented can be thought as a microfounded story of Blanchard's Good-News-Bad-News model of public policy. (author's)
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  4. 4
    253503

    Aging, intergenerational distribution and public pension systems.

    Jensen SE; Nielsen SB

    PUBLIC FINANCE/FINANCES PUBLIQUES. 1993; 48, Suppl.:29-42.

    This paper develops an intertemporal simulation model capable of addressing the macroeconomic and distributional effects of demographic shocks in a small open economy. Two sources of population aging are examined, viz. lower birth rates and prolonged expected lifetimes at retirement age. Due to strong expectational effects, both shocks are found to change average consumption in a downward direction, in the short run as well as in the long run. This effect is matched by a strong net acquisition of foreign assets. Furthermore, it turns out that the intergenerational distribution of the burden of adjusting to an aging population is strongly dependent on whether the benefit rate, the contribution rate, or the relative non-capital income of pensioners and workers is held fixed. (EXCERPT)
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  5. 5
    254878

    Endogenous fertility and the consumption tax.

    Kobayashi Y

    JAPANESE ECONOMIC REVIEW. 1996 Sep; 47(3):313-20.

    The differential incidence between the consumption tax and the labour income tax is examined in a model where altruistic parents decide the number of children endogenously. In contrast with past results, the consumption tax is not neutral and exerts distortional effects. As a result, welfare gets worse off through the tax reform of switching from a labour income tax to a consumption tax. This provides the argument about the treatment of bequests under a consumption tax. (EXCERPT)
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  6. 6
    129627

    Intergenerational resource flows in Cote d'Ivoire: empirical analysis of aggregate flows.

    Stecklov G

    POPULATION AND DEVELOPMENT REVIEW. 1997 Sep; 23(3):525-53.

    Application of new intergenerational resource flow models to data from the Ivory Coast 1) reveals that wealth flows from older to younger generations in this high-fertility setting, 2) indicates how wealth is accumulated by individuals, and 3) exposes the complementary role of private and public transfers in the redistribution of resources between different age groups. The article begins with a review of the theory and evidence covering intergenerational transfers. The next section notes that data for the present study were gathered from the World Bank's 1986 Living Standards Measurement Study of the Ivory Coast and discusses 1) reasons for the fact that per capita consumption is about 20% greater than per capita labor income, 2) the assumptions used to allow individual-level consumption and labor earning measures to be derived from the household-level data, and 3) how individual labor earning estimates were derived. The third section provides the analysis of the consumption and labor income profiles, and section 4 explains the derivation of per capita wealth and per capita transfers. Section 5 deals with the role of population growth, and the sixth section covers the intergenerational flows of public-sector resources through a look at the composition of the public sector in the Ivory Coast, government expenditures, government revenues, and the combination of family and public-sector flows. It is concluded that application of this new framework has yielded important findings including the fact that wealth flows downward in this high-fertility setting. Public-sector flows were also strongly downward and were dominated by education expenses. The average citizen in the Ivory Coast experiences negative life-cycle wealth until nearly age 50. High fertility may continue despite the high cost of children as long as children remain the best source of old-age support for parents.
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  7. 7
    100079

    Fertility and economic growth.

    Zhang J

    Ann Arbor, Michigan, University Microfilms International, 1993. viii, 117 p.

    The author models fertility and economic growth simultaneously in overlapping generations frameworks. The first chapter focuses upon the relationship between fertility and wage rates, examining the effects on fertility and growth of subsidies for education and for the cost of rearing children by assuming that agents care about the consumption and number of children. Chapter two compares fertility and economic growth between economies with or without markets and firms by assuming that agents are concerned about the consumption of their old parents and/or the consumption and the number of their children. It is shown that transforming a traditional economy into a market economy brings about lower fertility but faster growth of per capita output if altruism is one-sided towards parents. Chapter three then investigates the effects of social security upon fertility and economic growth. It is shown that an unfunded social security program may speed up economic growth by reducing fertility and increasing the ratio of human capital investment per child to family income even if saving rates fall, and may bring about faster economic growth than a funded program. Even if fertility is exogenous and private intergenerational transfers are operative, the neutrality of unfunded social security fails to hold due to human capital investment in children, although the saving rate is unchanged.
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  8. 8
    070818

    Healthy people -- in numbers the world can support.

    Sadik N

    WORLD HEALTH FORUM. 1991; 12(3):347-55.

    The issues of health, development and population are all interrelated. There large, rapidly growing population can adversely affect both health and development. currently 95% of the population growth is occurring in the development world. Progress in development creates opportunities to improve health and reduce population through education and contraception. The general health of the population affects development because people need to be healthy in order to work and contribute to socioeconomic progress. By the year 2000 40% of the developing world's projected population of 5 billion will be under 25. It is now recognized that reducing the population is in everyone's best interest as the size it has reached is already having a negative effect on the world economy and health. In order to be successful the developed nations need to increase development assistance for international family planning to US$9 billion by 2000. In addition the role of women in development must be expanded, for without their inclusion in sustainable development planning, success will not come. Critical areas include education, employment and health care. Also, family planning and maternal/child health should be integrated into the general health care system in order to improve cost effectiveness and efficiency.
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  9. 9
    070817

    Ethics and the environment.

    Shrader-Frechette K

    WORLD HEALTH FORUM. 1991; 12(3):311-21.

    Today the effect upon the environment have moral implications. In order to establish a list of priorities for human conduct, it is necessary to understand the value of our own human lives and the value of our ecosystem. Different schools of thought have different priorities that they each try to support. The technocratic individualist (TI) believes that the end of progress and economic expansion, justifies any means. This attitude leads to the exploitation of the earth and violates the 2nd law of thermodynamics. It leaves the planet bare and lifeless. Current methods employed by the TIs are based on consumptive methods that extract what is needed without any concern for the future. the TIs' methods result in the tragedy of the commons, in which the common people are exploited for the benefit of an elite few. The environmental holist (EH) claims that we must abandon the anthropocentric ethics of the TIs; however, the EHs suffer from both scientific and ethical problems. If we do as the EHS say and respect all life, we can not eat, fight disease, or build shelter. Further, if we value ourselves equally with the rest of the ecosystem, then we could easily justify violating human rights and decent conduct in an effort of avoid doing harm in the ecosystem. The best compromise between these 2 extremes lies in contract ethics. Because we benefited from the people of the past, we have an obligation, through a social contract, to the people of the future. The last element of an acceptable list of priorities of conduct lies in the distinction between strong and weak rights. Strong rights are those necessary for our survival, weak rights are those that give our lives meaning. Thus our ethical priorities should be: (1) duty to recognize strong human rights: (2) duty to protect environmental interests; (3) duty to recognize weak human rights.
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  10. 10
    234503
    Peer Reviewed

    Life cycle savings and consumption constraints: theory, empirical evidence, and fiscal implications.

    Borsch-Supan A; Stahl K

    JOURNAL OF POPULATION ECONOMICS. 1991; 4(3):233-55.

    Recent tests of both the pure and the extended life cycle hypothesis have generated inconclusive results on the life cycle behavior of the elderly. We extend the life cycle model by introducing a constraint on the physical consumption opportunities of the elderly which, if binding, imposes a consumption trajectory declining in age. This explains much of the received evidence on the elderly's consumption and savings behavior, in particular declining consumption, and increasing savings and wealth with increasing age. Our analysis of [Federal Republic of Germany] data gives additional support to our theory. We finally draw the implications of the theory on the incidence of consumption and income (wealth) taxes, and on the recent (inconclusive) tests of intergenerational altruism. (EXCERPT)
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  11. 11
    201934

    Equilibrium and efficiency in intergenerational transfers.

    Ben-Zion U; Gradstein M

    In: Demographic change and economic development, edited by Alois Wenig and Klaus F. Zimmermann. Berlin, Federal Republic of Germany, Springer-Verlag, 1989. 152-65. (Studies in Contemporary Economics)

    The focus of this study concerns a family consisting of 2 altruistic agents, the parent and the child. The model is cast within a 2-period framework where, in the 1st period, the parent decides on the allocation of his resources between consumption and investment in the human capital of his child, and, in the 2nd period, the child has to decide how much of his (acquired through the parent's transfer) wealth to give away for the support of his parent. The 1st result establishes that the outcome of the game of transfer is inefficient; the possible means of attaining efficiency are investigated. Finally, the impact of uncertainty regarding a child's preferences on the game equilibrium are analyzed.
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  12. 12
    061536
    Peer Reviewed

    Intergenerational transfers in industrialised countries: effects of age distribution and economic institutions.

    Ermisch J

    JOURNAL OF POPULATION ECONOMICS. 1989; 1(4):269-84.

    In Great Britain, using mid 1980s data and assuming no productivity increase over generations thereby making the discount rate and population growth rate 0, the average ages of household consumption and production stood at 46.3 and 41.3 respectively. Further, assuming 2% annual productivity growth and discount rates, the average consumption age was 41.7 and the average production age was 38.7. Therefore, net transfers here passed from the younger to older generations. In Japan, 1985 data shows that, under the same assumptions as Great Britain, the average ages of household consumption and production stood at 50.8 and 44.3 respectively. When assuming 2% annual productivity growth and discount rates, Japan's average consumption age was 41.7 and it's average production age was 38.7. Like Great Britain, Japan's net transfers passed from the younger to older generations. Specifically, production was significantly higher than consumption in the 20-60 year old age group and the reverse occurred in the older age groups. Even though there were similar patterns between the 2 countries, the difference between the average ages of consumption and production for Japan is much larger than for Great Britain. Further, it is even greater than the United States' whose estimates correspond to Japan's and Great Britain's. Specifically, the strength of the transfer effect is higher for Japan than Great Britain or the US because of the longer life expectancy among the Japanese. In addition, due to changes in fertility and mortality, the proportion of the <15 year olds has decreased and the proportion of those > or = 65 years old has increased. Therefore net transfers have shifted in favor of the older generations.
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  13. 13
    061533
    Peer Reviewed

    Age structure and capital dilution effects in neo-classical growth models.

    Blanchet D

    JOURNAL OF POPULATION ECONOMICS. 1988; 1(3):183-94.

    Economists often over estimate capital dilution effects when applying neoclassical growth models which use age structured population and depreciation of capital stock. This occurs because capital stock is improperly characterized. A standard model which assumes a constant depreciation of capital intimates that a population growth rate equal to a negative constant savings ratio is preferable to any higher growth rate. Growth rates which are lower than a negative constant savings ratio suggest an ever growing capital/labor ratio and an ever growing standard of living, even if people do not save. This is suggested because the natural reduction of the capital stock through depreciation is slower than the population decrease which is simply unrealistic. This model overlooks the fact that low or negative growth rates result in an ageing of the capital stock, and this ageing subsequently results in an increase of the overall rate of capital depreciation. In that overly simplistic model, depreciation was assumed independent of the age of the captial stock. Incorporating depreciation as a variable into a model allows a more symmetric treatment of capital. Using models with heterogenous capital, this article explores what occurs when more than 1 kind of capital good is involved in production and when these various captial goods have different lengths of life. Applying economic models, it also examines what occurs when the length of life of capital may vary. These variations correct the negative impact that population growth can have on per capital production and consumption.
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  14. 14
    230629

    Social Security as trade among living generations.

    Hansson I; Stuart C

    AMERICAN ECONOMIC REVIEW. 1989 Dec; 79(5):1,182-95.

    We model [U.S.] Social Security that is legislated endogeneously by living generations. Specifically, we consider the effects of Social Security on resource allocation and Pareto optimality, examining which generations gain from Social Security and whether some generations lose. Because saving and transfer decisions are made sequentially in the real world, we use an infinite-horizon, overlapping-generations framework in which life-cycle saving and transfers to the old are determined by living agents. We focus on the case in which agents are altruistic but place sufficiently greater weight on own comsumption than on the consumption of agents in other generations so that, starting from a steady state without Social Security, living agents would gain utility if consumption were shifted marginally to them from later generations. (EXCERPT)
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  15. 15
    229345

    Intergenerational flows of time and goods: consequences of slowing population growth.

    Lee RD; Lapkoff S

    JOURNAL OF POLITICAL ECONOMY. 1988 Jun; 96(3):618-51.

    A theoretical model of intergenerational transfers is developed in order to examine the effect of low fertility and older age distributions in developed countries on consumption. "With the aid of time budget and consumer expenditure surveys, empirical estimates of the age profiles of various types of time and goods consumption are presented, and we conclude that (1) the net direction of intergenerational transfers is from younger to older ages; (2) under the golden-rule assumption, these transfers largely constitute an externality to childbearing; and (3) they are not large enough to offset the capital dilution effect that would result from higher fertility and more rapid population growth." (EXCERPT)
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  16. 16
    226921

    Human capital and the rise and fall of families.

    Becker GS; Tomes N

    JOURNAL OF LABOR ECONOMICS. 1986 Jul; 4(3, Pt. 2):1-47.

    This paper develops a model of the transmission of earnings, assets, and consumption from parents to descendants. The model assumes utility-maximizing parents who are concerned about the welfare of their children. The degree of intergenerational mobility is determined by the interaction of this utility-maximizing behavior with investment and consumption opportunities in different generations and with different kinds of luck. We examine a number of empirical studies for different countries. Regression to the mean in earnings in rich countries appears to be rapid. Almost all the earnings advantages or disadvantages of ancestors are wiped out in three generations. A comment by Robert J. Willis is included (pp. 40-7). (EXCERPT)
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  17. 17
    226113

    [The decline of marriage] Le recul du mariage.

    Forse M

    OBSERVATIONS ET DIAGNOSTICS ECONOMIQUES. 1986 Jul; (16):217-34.

    The implications of current changes in marriage patterns in France are explored. The author notes that the growing popularity of consensual union has not significantly affected the homogamy of couples and the transfer of resources between generations. However, the social and economic consequences of these changes in nuptiality are significant, involving a decline in fertility, changes in the demand for employment, increased housing needs, changes in social security, and changes in consumer demands. (ANNOTATION)
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  18. 18
    030219

    Population growth and intergenerational transfers in a household setting.

    Lee R

    [Unpublished] 1985. Presented at the Annual Meeting of the Population Association of America, Boston, Massachusetts, March 28-30, 1985. 36 p.

    Important questions of theory and policy turn on the measurement of intergenerational transfers and determination of their net direction and magnitude, yet no serious effort has been made to estimate these. This discussion shows that when the conceptual issues are clarified, it is possible to draw on existing data and research to quantify the transfers, establish their net direction, and evaluate the externalities to childbearing arising from transfers. Samuelson anticipated that increased fertility would lead to large positive benefits from intergenerational transfers, on the assumption that children's consumption could be ignored. Arthur-Micnicoll though that effects would be substantially negative when children's costs were included in the reckoning. Without explicit guidance one might choose the average expenditure per child in a 2 child family, or the average expenditure on the 3rd child. These differ importantly. The first is about 30% more than the third, while the second is about .67 of the third; the first and second differ by a factor of two. The setup used by Arthur-McNicoll and by Lee required that the average and marginal costs be equal, and satisfaction of accounting identities would require that the first concept be used. Analysis revealed that none of these three is totally apporpriate, but that the third is most nearly so. The correct procedure is to use the third concept for the within household effect, and for the between household effect to use household consumption by age of head, which implicitly reflects any influence that number and age of children actually have on household consumption. When this is done, it is possible to measure, at least approximately, the transfer effects of more rapid growth, and the externalities to childbearing to which they give rise. The results indicate that the net direction of transfers is from the younger to older ages. A 1% increase in the population growth rate now leads to a 4.4% increase in life cycle consumption. Taking the results at face value, there are net upward transfers in the US, particularly if attention is restricted to between household transfers.
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  19. 19
    026482

    Bequests and the size of population when population is endogenous

    Nerlove M; Razin A; Sadka E

    Journal of Political Economy. 1984 Jun; 92(3):527-31.

    This note considers the problem of a utility maximizing family when utility depends on own consumption, number of children, and indirectly, on children's welfare through the bequests parents make. A novel feature of the approach is that the welfare of a child's own family depends on the bequest of both the child and the child's spouse. Due to the fact that each family derives utility from the bequests of other families through marriages, Pareto optimality can be attained only if parents are free to bargain with each other about what each child's family will leave to its children. In modern times, when so much of parents' bequests is in the form of human capital, property rights such as these are difficult or impossible to enforce and marriages are not "arranged" in this manner by parents. If the children are free to choose and marry for reasons unrelated to bequests, and if bequests are determined before the choice, then it will be shown that the level of bequests will also be less than a symmetric Pareto optimal allocation. It is also shown that under a suitable separability assumption, the number of children each family bears is larger than a symmetric Pareto optimal allocation. It is emphasized that only the question of allocative efficiency among members of the 1st generation (parents) is considered, that is, the social welfare is the individual parent's and the children enter only through their parents' utility functions. Under the assumption of weak separability of bequests in the parents' utility function from family consumption and number of children, the less than optimal level of bequests is associated with too large a rate of population growth. The concern here is only with market failure due to the potential externality introduced by bequests. The optimal population size and level of bequests under alternative social welfare functions are considered elsewhere. The externality identified here applies not only to bequests in the form of physical captial but, expecially, to bequests in the form of investments in the human capital of children. It is the latter that effectively prevent establishment of a system of property rights of parents in children that would eliminate the externality.
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  20. 20
    030728

    An empirical test of the effect of social security on fertility in the United States

    Swidler S

    American Economist. 1983 Fall; 27(2):50-7.

    The author attempts to estimate the effects of the social security program on fertility in the United States from 1933 to 1974. A fertility model based on the choice theoretic calculus is presented, "with the distinguishing feature that the childbearing cohort's utility depends on own consumption as well as consumption of their retired parents. In this framework, changes in social security affect household income, and thus fertility, directly, as well as indirectly due to substitution of social security for private intergenerational transfers." (EXCERPT)
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