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

Roozbeh Hosseini; Larry E. Jones; Ali Shourideh

doi:10.1016/j.jet.2013.04.022

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

Roozbeh Hosseini
, Larry E. Jones
, Ali Shourideh

Economics (Twin Cities)

Research output: Contribution to journal › Article › peer-review

6 Scopus citations

Abstract

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.

Original language	English (US)
Pages (from-to)	1806-1840
Number of pages	35
Journal	Journal of Economic Theory
Volume	148
Issue number	5
DOIs	https://doi.org/10.1016/j.jet.2013.04.022
State	Published - Sep 2013

Bibliographical note

Funding Information:
We are indebted to Alice Schoonbroodt for all of her helpful comments and suggestions at various stages of this project. We would also like to thank Laurence Ales, V.V. Chari, Bob Lucas, Mike Golosov, Greg Kaplan, Chris Phelan, Richard Rogerson, Maxim Troshkin, Aleh Tsyvinski, Ariel Zetlin-Jones and seminar participants at ASU, Columbia, Carnegie Mellon, Iowa, Ohio State, St. Louis Fed, Texas Austin, Western Ontario, Wharton, Yale, 2009 SED summer meeting, 2009 Minnesota Macro Workshop and 2010 Cowles Summer Conference for comments. We would like to also thank two anonymous referees and Christian Hellwig (the editor) for helpful comments and suggestions. Larry E. Jones thanks NSF for financial support, NSF Grant No. SES-0962432 .

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

Keywords

Altruism
Endogenous fertility
Long run inequality
Private information
Risk sharing

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10.1016/j.jet.2013.04.022

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title = "Optimal contracting with dynastic altruism: Family size and per capita consumption",

abstract = "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.",

keywords = "Altruism, Endogenous fertility, Long run inequality, Private information, Risk sharing",

author = "Roozbeh Hosseini and Jones, \{Larry E.\} and Ali Shourideh",

note = "Funding Information: We are indebted to Alice Schoonbroodt for all of her helpful comments and suggestions at various stages of this project. We would also like to thank Laurence Ales, V.V. Chari, Bob Lucas, Mike Golosov, Greg Kaplan, Chris Phelan, Richard Rogerson, Maxim Troshkin, Aleh Tsyvinski, Ariel Zetlin-Jones and seminar participants at ASU, Columbia, Carnegie Mellon, Iowa, Ohio State, St. Louis Fed, Texas Austin, Western Ontario, Wharton, Yale, 2009 SED summer meeting, 2009 Minnesota Macro Workshop and 2010 Cowles Summer Conference for comments. We would like to also thank two anonymous referees and Christian Hellwig (the editor) for helpful comments and suggestions. Larry E. Jones thanks NSF for financial support, NSF Grant No. SES-0962432 . ",

year = "2013",

month = sep,

doi = "10.1016/j.jet.2013.04.022",

language = "English (US)",

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T2 - Family size and per capita consumption

AU - Hosseini, Roozbeh

AU - Jones, Larry E.

AU - Shourideh, Ali

N1 - Funding Information: We are indebted to Alice Schoonbroodt for all of her helpful comments and suggestions at various stages of this project. We would also like to thank Laurence Ales, V.V. Chari, Bob Lucas, Mike Golosov, Greg Kaplan, Chris Phelan, Richard Rogerson, Maxim Troshkin, Aleh Tsyvinski, Ariel Zetlin-Jones and seminar participants at ASU, Columbia, Carnegie Mellon, Iowa, Ohio State, St. Louis Fed, Texas Austin, Western Ontario, Wharton, Yale, 2009 SED summer meeting, 2009 Minnesota Macro Workshop and 2010 Cowles Summer Conference for comments. We would like to also thank two anonymous referees and Christian Hellwig (the editor) for helpful comments and suggestions. Larry E. Jones thanks NSF for financial support, NSF Grant No. SES-0962432 .

PY - 2013/9

Y1 - 2013/9

N2 - 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.

AB - 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.

KW - Altruism

KW - Endogenous fertility

KW - Long run inequality

KW - Private information

KW - Risk sharing

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SP - 1806

EP - 1840

JO - Journal of Economic Theory

JF - Journal of Economic Theory

IS - 5

ER -

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

Abstract

Bibliographical note

UN SDGs

Keywords

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