Paper #150

Title:

Altruism, uncertain lifetime and the distribution of wealth

Author:

Luisa Fuster

Date:

December 1995

Abstract:

This paper studies the dynamics of the distribution of wealth in a general equilibrium framework. It considers an overlapping generations model with production and altruistic preferences in which individuals face an uncertain lifetime and annuity markets do not exist. This paper focuses on the role that accidental bequests, voluntary bequests, and non--negativity constraints on bequests play in the dynamics of the distribution of wealth. It is proved that the equilibrium interest rate is lower than the one that satisfies the modified golden rule. In this economy, a social security system not only plays an insurance role, but also prevents capital overaccumulation. In fact, this paper shows that a pay--as--you--go social security system decentralizes the social planner solution as a competitive equilibrium.

Area of Research:

Macroeconomics and International Economics

Published in:

Review of Economic Dynamics 3, (2000)
With the title:
Capital Accumulation in an Economy with Dynasties and Uncertain Lifetimes

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