Social Mobility: The Barro–Becker Children Meet the Laitner–Loury Dynasties

Álvarez, Fernando

doi:10.1006/redy.1998.0052

Cited by 49 publications

(93 citation statements)

References 19 publications

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Section: Model Setupmentioning

confidence: 99%

“…Therefore, the first-order conditions of this problem, while necessary, are not sufficient for an optimum. Instead of using second-order conditions to characterize the solution, one way to circumvent this problem is to follow Alvarez (1999) and to write the utility and constraints in terms of dynasty aggregates. This formulation is technically convenient in the proof of Proposition 14 and allows us to derive simple parameter conditions for the problem to be well defined when functional forms assumptions are made (see below).…”

Section: A1 Dynastic Problem In Aggregatesmentioning

confidence: 99%

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Property rights and efficiency in OLG models with endogenous fertility

Schoonbroodt

Tertilt

2014

Journal of Economic Theory

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Is there an economic rationale for pronatalist policies? We propose and analyze a particular market failure that leads to inefficiently low fertility in equilibrium. The friction is caused by the lack of ownership of children: if parents have no claim on their children's income, the private benefit from producing a child can be smaller than the social benefit. We analyze an overlapping-generations model with fertility choice and parental altruism. Ownership is modeled as a minimum constraint on transfers from parents to children. Using the efficiency concepts proposed in Golosov, Jones, and Tertilt (2007), we find that whenever the transfer floor is binding, fertility choices are inefficient. Second, we show that the usual conditions for efficiency are not sufficient in this context. Third, in contrast to settings with exogenous fertility, a PAYG social security system cannot be used to implement efficient allocations. To achieve an efficient outcome, government transfers need to be tied to fertility choice. JEL Classification: D6, E1, H55, J13

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Section: Model Setupmentioning

confidence: 99%

Section: A1 Dynastic Problem In Aggregatesmentioning

confidence: 99%

Property rights and efficiency in OLG models with endogenous fertility

Schoonbroodt

Tertilt

2014

Journal of Economic Theory

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“…Therefore, we follow Alvarez (1999) and reformulate the problem in terms of aggregates rather than per capita variables. For any history θ t , define C t (θ t ) = N t (θ t−1 ) c t (θ t ) and Y t (θ t ) = N t (θ t−1 ) y t (θ t ) to be aggregate consumption and aggregate effective labor unit for a generation with history θ t whose ancestors received history of shocks of θ t−1 .…”

Section: The Contracting Problemmentioning

confidence: 99%

Optimal contracting with dynastic altruism: Family size and per capita consumption

Hosseini

Jones

Shourideh

2013

Journal of Economic Theory

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We use a Barro-Becker model of endogenous fertility, in which parents are subject to idiosyncratic shocks that are private information (either to labor productivity or taste for leisure), to study the efficient degree of consumption inequality in the long run. The planner uses the trade-off between family size and future consumption and leisure, to provide incentives for workers to reveal their shocks. We show that in this environment, the optimal dynamic contract no longer features immiseration in consumption. We also discuss the implications of the model on the long run properties of family size in the optimal contract and show that the long run trend in dynasty size can be either positive or negative depending on parameters. We use a Barro-Becker model of endogenous fertility, in which parents are subject to idiosyncratic shocks that are private information (either to labor productivity or taste for leisure), to study the efficient degree of consumption inequality in the long run. The planner uses the trade off between family size and future consumption and leisure, in addition to the usual variables, to provide incentives for workers to reveal their shocks.We show that in this environment, the optimal dynamic contract no longer features immiseration in consumption. We also discuss the implications of the model on the long run properties of family size in the optimal contract and show that the long run trend in dynasty size can be either positive or negative depending on parameters.

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“…These papers show that while wealth inequalities may be reduced, they do persist in the long-run. In contrast, another much thinner literature introducing endogenous fertility in line with Barro and Becker [1,5] has shown that inequalities do not persist. Implicit in these seminal papers, this striking property has been demonstrated in a quite general model using dynamic programming with homogenous functions by Alvarez [6].…”

Section: Introductionmentioning

confidence: 98%

“…We notice that As stressed by Becker and Barro [1], the recursive model (1) can be equivalently written as an optimal growth model where the household of type i maximizes a dynastic utility:…”

Section: Introductionmentioning

confidence: 99%

The Dynamics of Wealth Inequality under Endogenous Fertility: A Remark on the Barro-Becker Model with Heterogenous Endowments

Bosi¹,

Boucekkine²,

Seegmuller³

2011

TEL

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Implicit in the seminal contribution of Barro-Becker [1], the lack of persistence of inequality in the presence of endogenous fertility is one of the most striking features of the models à la Barro-Becker. In this pedagogical note, we show how to uncover and interpret the latter property using standard optimization in contrast to the dynamic programming under homogeneity usually invoked in this literature.

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Social Mobility: The Barro–Becker Children Meet the Laitner–Loury Dynasties

Cited by 49 publications

References 19 publications

Property rights and efficiency in OLG models with endogenous fertility

Property rights and efficiency in OLG models with endogenous fertility

Optimal contracting with dynastic altruism: Family size and per capita consumption

The Dynamics of Wealth Inequality under Endogenous Fertility: A Remark on the Barro-Becker Model with Heterogenous Endowments

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