Scandinavian Working Papers in Economics

Seminar Papers,
Stockholm University, Institute for International Economic Studies

No 624: Strategic Saving and Non-Negative Gifts

Nils-Petter Lagerlöf
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Nils-Petter Lagerlöf: Institute for International Economic Studies, Stockholm University, Postal: Stockholm University, S-106 69 Stockholm, Sweden

Abstract: O'Connell and Zeldes (1993) have shown that the dynamic inefficiency result of a standard gift model is reversed if parents can undersave strategically. I impose an explicit non-negativity constraint on gifts, which - for all numerical examples suggested by O'Connell and Zeldes - alters this result, by making gifts non-operative. However, for other realistic numerical examples, this is not the case.

Keywords: Dynamic efficiency; Altruism; Gifts; Overlapping generations; Saving

JEL-codes: D91; H31

20 pages, October 31, 1997

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