Intergenerational Altruism Research Articles

Public Education Investment, Economic Growth and Welfare: A Political Economy Analysis with Preference Heterogeneity

This study examines the politics of public education policy and its impact on economic growth and welfare under intergenerational altruism. The study considers an endogenous growth model with altruistic overlapping generations. Due to its significant role in promoting long-term economic expansion, we consider investment in public education to be an effective tool of productive government intervention. Nonetheless, public educational investment has been the subject of political disputes owing to its inherent intergenerational redistributive implications. Backed by the tendency of democratically elected governments to maintain their political power, the preferences of some particular individuals or group of individuals become more dominant in the political process of determining the level of public investment in education. In particular, governments are more concerned with the preferences of the median voter, or the current generation at large, because they, as electors, have the ability to determine the next government. This reality leads governments to exhibit a bias toward the desires of these people. As a result, such political considerations divert the economy from its optimal path of economic growth and reduce the welfare of future generations. This effect becomes more pronounced when individuals with lower levels of altruism toward their offspring assume a more influential position in the political decision-making process over the allocation of public funds for education. Our theoretical analyses demonstrate the implications for economic growth and welfare resulting from policy decisions made by democratically elected governments with inherent biases, as opposed to decisions made by an unbiased social planner.

Intergenerational altruism and climate policy preferences.

Climate mitigation constitutes an intergenerational moral dilemma; the decisions we make today will inevitably shape the prospects for generations to come. Yet, we still know little about the relationship between intergenerational altruism (IGA)-our concerns for the well-being of future generations-and support for costly climate mitigation policies. In this study, we present an approach to measuring IGA through an intergenerational dilemma, where participants allocate resources across generations. First, we describe how IGA depends on the temporal (social) distance between generations and demonstrate robust correlations between IGA and support for several climate policies. Then, we leverage randomized participation in the intergenerational dilemma to show that it causally increases climate policy support, an effect we attribute to higher worries about human-induced climate change among treated subjects. An exploratory heterogeneity analysis suggests that the impact of the intergenerational dilemma is primarily driven by female and nonbinary participants. In sum, this study presents both a novel measurement strategy and robust evidence of a malleable moral basis of climate policy preferences.

Intergenerational altruism, pessimism bias on tenure insecurity, and sustainable land use: Evidence from household grassland management in China

This paper investigates the relationship between intergenerational altruism, pessimism bias, and grassland use among rural households in the pastoral region of northwest China. By designing a series of hypothetical questions, we develop measures of intergenerational altruism and pessimism bias, and examine their impact on actual grazing behavior. Our analysis reveals that households with weaker intergenerational altruism and stronger pessimism bias tend to increase their livestock scale without a corresponding increase in supplementary feeding, suggesting that our measures can serve as reliable predictors of grassland overuse. Furthermore, to investigate whether the grant of long-term land rights to rural households mitigates the negative impact of pessimism bias on grassland management, we employ panel data collected before and after a land reform in China. Our results demonstrate that the reform weakens the adverse effects of pessimism bias and promotes the sustainable use of grassland.

The rate of discount on public investments with future bias in an altruistic overlapping generations model

A typical approach to evaluating public investment projects requires an appropriate rate for discounting future benefits and costs. In many developed countries, the practical discount rate for benefit–cost analysis has been calculated using the Ramsey formula in an optimal growth model, stretched back to the pioneering work presented by Frank Ramsey in 1928. Intergenerational altruism that is widely observed in our society generates future bias. Therefore, elected governments under democracies are future-biased. In such cases, the Ramsey formula is no longer valid. This paper derives a modified Ramsey formula for an appropriate social discount rate to be applied instead of the conventional Ramsey formula. We also examine properties of equilibrium policy. The degree of future bias depends on the political power of young people relative to elderly people. Demographic effects such as population aging negatively affect public investment through decreasing future bias effects. This paper contributes to the optimal theory of public investment for calculating an appropriate social discount rate, both theoretically and practically.

Transgenerational Communitarianism in a Global Interconnected World: A Critique

Abstract We discuss how transgenerational communitarianism deals with public decisions involving tradeoffs between different generations’ wellbeing and having global consequences. Policies for tackling climate change are an example. Although there is a natural, evolutionary, basis for intergenerational altruism, most people lack the competencies for constituting a transgenerational community. Moreover, greater attention to future generations’ wellbeing need not substitute for collective action: a lower discount rate reflecting a stronger concern for future generations may even worsen their wellbeing. Finally, in a world of irreducible value pluralism, there is no community of persons sharing moral values that can legitimize common policies for addressing global problems: only the common interest of avoiding destructive consequences may motivate collective action to face problems like climate change.

Experimental Field Evidence of Common Pool Resources: The Water Judge in Bolivia

Common pool resources (CPRs) are usually exploited one generation after another – often overexploited - meaning there is an intergenerational link between the consumers – e.g., water for farming activities. This key dimension is often not considered in theoretical or field experiments, due to the difficultly in approaching it. We want to overcome this barrier introducing the hypothesis of ‘’intergenerational altruism” for CPRs. The implication is that altruism reduce the exploitation of the natural resources, since the agents recognize that the exploitation not only creates negative externalities for their own generation, but also for all future generations. An alternative hypothesis is the ‘’intergenerational equity’’ where the agents restrain their consumption to equalize their income over time. To prove these hypotheses, we conducted a field experiment in four farming communities located in the Bolivian Department of Chuquisaca during the third quarter of 2019. We consider common water for farming activities as a CPRs, since these communities use this resource for several decades, the intergenerational link is evident. Our intergenerational field experiment includes four treatments based on the replacement rate of the resources – i.e., FAST, SLOW, RESTART or normal replacement, under one-shot non-cooperative game without feedback. We also introduce two variations, the possibility to accumulate water in a dam, which modify the availability of CPRs. Second, the possibility to manage the common farming water through the traditional social arrangement of the Water Judge, which is a representative member of the community delegated to solve problems related with water management, named SAT treatment. The results showed that our hypothesis was not probed since the intergenerational link does not mitigate the overexploitation of CPRs. Nevertheless, we also found that the “Water Judge” could be a cost-effective treatment in small farming communities.

Cross-Dynastic Intergenerational Altruism

Decisions with long-term consequences require comparing utility derived from present consumption to future welfare. But can we infer socially relevant intertemporal preferences from saving behavior? I allow for a decomposition of the present generation’s preference for the next generation into its dynastic and crossdynastic counterparts, in the form of welfare weights on the next generation in the own dynasty and other dynasties. Welfare weights on other dynasties can be motivated by a concern for sustainability, or if descendants may move or marry outside the dynasty. With such cross-dynastic intergenerational altruism, savings for one’s own descendants benefit present members of other dynasties, giving rise to preference externalities. I find that socially relevant intertemporal preferences may not be inferred from saving behavior if there is cross-dynastic intergenerational altruism. I also show that the external effect of present saving decreases over time. This means that intertemporal preferences inferred from saving behavior are time-inconsistent, unless cross-dynastic intergenerational altruism is accounted for.

No Successor, No Success? Impact of a Little Son on Business Performance

The dynasty model, which assumes the presence of intergenerational altruism, implies that business owners will have more incentive to improve the firm’s performance if they expect their children to take over the firms. This study empirically examines how top managers’ expectations about future family succession affect the performance of small family firms. Exploiting the sex of the top manager’s first-born child as an instrumental variable for the manager’s expectations about business succession by his child, we find that the existence of a potential family successor has a positive effect on profit. We also find that the presence of a potential family successor induces business expansion and the managers’ actions to enhance performance, such as improving operational efficiency and investing in information technology.

Growth, automation, and the long-run share of labor

We study the long run implications of workplace automation induced by capital accumulation. We describe a minimal set of sufficient conditions for sustained growth, along with a declining labor share of income in the long run: (i) a basic asymmetry between physical and human capital; (ii) the technical possibility of automation in each sector; (ii) a self-replication condition on the production function for robot services; (iv) asymptotic homotheticity (more generally neutrality) of demand, and (v) a minimal degree of patience or intergenerational altruism among a fraction of households. However, the displacement of human labor is gradual, and absolute real wages could rise indefinitely. The results obtain in the absence of any technical progress; they extend to endogenous technical progress even if such progress is not biased ex ante in favor of automation.

Economic growth, equilibrium welfare, and public goods provision with intergenerational altruism

This study examines the government policy of public goods provision and its effects on economic growth and welfare under intergenerational altruism. The study considers an endogenous growth model with altruistic overlapping generations. The preferences of the current youth exhibit a future bias, and thus, democratically elected governments are subject to this future bias. The optimal rule for the supply of public goods under future bias differs from the original Samuelson rule. Unlike the standard growth model without any bias, under the optimal rule, the equilibrium growth rate is not independent of government size. Future bias gives young generations the dynamic incentives to invest more. With future bias, the intergenerational redistributive effects of public goods stimulate such incentives under certain conditions. Hence, the government size affects the economic growth through intertemporal changes in their resource allocations. Moreover, the growth effect of the government size provides nontrivial outcomes of welfare analysis. Our numerical analyses show the growth and welfare superiority of the democratic governments to the nonbiased social planner.

Will the Paris Accord Accelerate Climate Change?

The 2015 Paris climate accord (Paris Agreement) is meant to control our planet’s rising temperature to limit climate change. But it may be doing the opposite in permitting a slow phase-in of CO2 emission mitigation. The accord asks its 195 national signatories to specify their emission reductions and to raise those contributions over time. However, there is no mechanism to enforce these pledges. This said, the accord puts dirty energy producers on notice that their days are numbered. Unfortunately, this “use it or lose it” message may accelerate the extraction and sale of fossil fuels and, thereby, permanently worsen climate change. Our paper uses a simple OLG model to illustrate this long-noted, highly troubling Green Paradox. Its framework properly treats climate damage as a negative externality imposed by today’s generations on tomorrow’s—an externality that is, in part, irreversible and, if large enough, can tip the climate to a permanently bad state. Our paper shows that delaying abatement can be worse than doing nothing. Indeed, it can make all generations worse off. In contrast, immediate policy action can make all generations better off. Finally, we question the standard use of infinitely lived, single-agent models to determine optimal abatement policy. Intergenerational altruism underlies such models. But its assumption lacks empirical support. Moreover, were such altruism widespread, effective limits on CO 2 emissions would, presumably, already be in place. Unfortunately, optimal abatement prescriptions derived from such models can differ, potentially dramatically, from those actually needed to correct the negative climate externality that today’s generations are imposing on tomorrow’s.

The role of gratitude in motivating intergenerational environmental stewardship

Many of the most pressing environmental challenges we face—from climate change to habitat and species loss—require present generations of decision-makers to act pro-socially in the best interests of future generations. One factor known to inhibit intergenerational altruism is the absence of direct reciprocal exchange between generations. Research has suggested, however, that present decision-makers can be induced to engage in intergenerational reciprocity (Wade-Benzoni, 2002). In accordance with recent studies (e.g., Watkins & Goodwin, 2019), our current investigation provides additional evidence for the role of gratitude as a powerful mechanism underlying such intergenerational decision-making. Across seven studies, we consistently show that individual differences in gratitude uniquely predict increased perceptions of responsibility for future generations. A sense of responsibility toward future generations in turn predicts: increased climate change beliefs and concern (Studies 2 A and 2 B), increased pro-environmental beliefs (Study 3 A) and environmental intentions (Study 3 B), and increased support for environmental policies (Study 4). Indirect effect tests and structural equation models support these findings. Future interventions can harness the prosocial moral emotion of gratitude to combat the temporal discount and promote intergenerational environmental decision making.

Fertility, migration, and altruism

AbstractMigration is a human capital investment in which parents bear costs and children share returns. Therefore, migrants from a population with heterogeneous intergenerational discount rates will self-select on intergenerational altruism. Intergenerational altruism and fertility are arguably linked, therefore immigrants might self-select on eventual fertility. Soviet Jews who migrated to Israel despite high migration costs averaged almost one child more than members of the same birth cohorts who migrated later, at lower cost. Distinguishing selection from treatment effects using mothers' age at migration, selection accounts for most of that difference (the proportion varies with specification), even with controls for religion and religiosity. Selection on fertility may have other explanations, including cultural preservation. To probe, we conduct an alternative empirical test of immigrant selection on altruism, finding that U.S. immigrants spend more time with grandchildren than do natives. Additionally, immigrant self-selection on fertility provides an alternative explanation for Chiswick's (1978, Journal of Political Economy86(5), 897–921) earnings-overtaking result.

Intergenerational Altruism and Retirement Transfers

I contribute new evidence on altruistic preferences in intergenerational transfers using variation in Social Security benefits induced by an inflation-indexing mistake. The instrument is most relevant for those with low education, so I focus on this group. I find support for pure altruism because individuals who received additional Social Security benefits passed on 15.4 percent to children via inter vivos transfers without receiving any additional care in return. On the contrary, children reduce caregiving monotonically with increases in parental Social Security benefits. Adult female children appear to be the most affected as they both receive monetary transfers and reduce caregiving.

Intergenerational Altruism and Retirement Transfers: Evidence from the Social Security Notch

I contribute new evidence on altruistic preferences in intergenerational transfers using variation in Social Security benefits induced by an inflation-indexing mistake. The instrument is most relevant for those with low education, so I focus on this group. I find support for pure altruism because individuals who received additional Social Security benefits passed on 15.4 percent to children via inter vivos transfers without receiving any additional care in return. On the contrary, children reduce caregiving monotonically with increases in parental Social Security benefits. Adult female children appear to be the most affected as they both receive monetary transfers and reduce caregiving.

Cross-Dynastic Intergenerational Altruism

This paper studies whether saving behavior may reveal socially relevant intertemporal preferences. I decompose the present generation's preference for the next into its dynastic and cross-dynastic counterparts. Welfare weights on other dynasties can be motivated by a concern for sustainability or if descendants may move or marry. With such cross-dynastic intergenerational altruism, saving for one's descendants benefits present members of other dynasties, giving rise to preference externalities. I find that socially relevant intertemporal preferences may not be inferred from saving behavior if there is cross-dynastic intergenerational altruism. I also show that the external effect of present saving decreases over time.

Intergenerational altruism in the migration decision calculus: evidence from the African American Great Migration

It is widely believed that many migrations are undertaken at least in part for the benefit of future generations. To provide evidence on the effect of intergenerational altruism on migration, I estimate a dynamic residential location choice model of the African American Great Migration in which individuals take the welfare of future generations into account when deciding to remain in the Southern USA or migrate to the North. I measure the influence of altruism on the migration decision as the implied difference between the migration probabilities of altruistic individuals and myopic ones who consider only current-generation utility when making their location decisions. My preferred estimates suggest that intergenerational altruism explains between 24 and 42% of the Northward migration that took place during the period that I study, depending on the generation.

Management of air pollution by a system of transferable individual emission permits with overlapping generations.

The purpose of this article is to analyze the effectiveness of a pollution management system through individual permits that are distributed to young people with overlapping generations. From a general equilibrium model, the results show that such a system provides the conditions for optimal pollution management. But because of the non-cooperative behavior of the actors, this policy cannot institute intergenerational altruism. Incentives such as tax or subsidy are needed to get the receiving population to better choose between the physical good whose production satisfies their needs and the quality of the environment that depends on their option to sell the permits to firms or the future generation.

Parents and Adult Children: The Elusive Boundaries of the Legal Family

The literature on the relationship between parents and adult children reveals an embedded tension. While the law typically characterizes parents and their adult children as legal strangers, several legal rules assume intergenerational altruism. This Essay argues that Someday All This Will Be Yours by Hendrik Hartog unpacks this dichotomy and offers a much richer depiction of intergenerational relations in an age of market economy. The book portrays an intermediate space where autonomous individuals engage in private ordering but the same parties also maintain a dynastic understanding of their commitments. This depiction provides a useful lens for the analysis of occurrences of informal care between parents and adult children. The Essay discusses intergenerational cohabitation in the wake of the 2008 financial crisis as an example of such an analysis.

Grandparents Matter: Perspectives on Intergenerational Altruism and a Pilot Intergenerational Public Good Experiment

The development and use of long-lived public goods involve more than one demographic generation, leaving the classic literature on voluntary provisions partially unfit to explain complex phenomena such as welfare systems, climate policies and major infrastructure projects. This paper proposes an experimental approach that can be used to further investigate how a public good is produced by one generation of individuals while the next reaps its benefits. Within this framework the case of intergenerational public goods production is explained using a spillover rule, where a percentage of the public good produced in time t by experimental parents will integrate the endowment of their artefactual children in t + 1. A cascade mechanism allows also for the rebirth of three generations of players, mimicking the biological and anthropological mechanisms of gene transmission and intergenerational altruism. Experimental evidence shows that subjects who are prompted on their lineage membership tend to contribute more compared to those who are not included in a dynastic framework. More importantly, results reveal that the true dynastic background of individuals is a prominent influence in the levels of contribution towards public goods.