When individuals have heterogeneous and persistent degrees of one‐sided parental altruism, inequality may grow large and standard social welfare criteria are problematic. If the planner selects Pareto optimal allocations based on some target level of consumption inequality, the solution implies an aggregation of individuals' utilities that is strongly asymmetric and biased toward the less altruistic dynasties. If instead, the planner uses a symmetric utilitarian criterion, the solution is likely to generate a large degree of long‐run inequality (even relative to laissez‐faire competitive equilibria), it can only be decentralized with negative estate taxes or lower bounds on bequests, and it is time‐inconsistent.

Social Welfare, Parental Altruism and Inequality / Reichlin, Pietro. - In: JOURNAL OF PUBLIC ECONOMIC THEORY. - ISSN 1467-9779. - 22:5(2020), pp. 1391-1419. [10.1111/jpet.12429]

Social Welfare, Parental Altruism and Inequality

Pietro Reichlin
2020

Abstract

When individuals have heterogeneous and persistent degrees of one‐sided parental altruism, inequality may grow large and standard social welfare criteria are problematic. If the planner selects Pareto optimal allocations based on some target level of consumption inequality, the solution implies an aggregation of individuals' utilities that is strongly asymmetric and biased toward the less altruistic dynasties. If instead, the planner uses a symmetric utilitarian criterion, the solution is likely to generate a large degree of long‐run inequality (even relative to laissez‐faire competitive equilibria), it can only be decentralized with negative estate taxes or lower bounds on bequests, and it is time‐inconsistent.
Social Welfare, Parental Altruism and Inequality / Reichlin, Pietro. - In: JOURNAL OF PUBLIC ECONOMIC THEORY. - ISSN 1467-9779. - 22:5(2020), pp. 1391-1419. [10.1111/jpet.12429]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/192361
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