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Consumption Externalities, Intergenerational Transfers and Altruism

  • Date 2017-08-29 (Tue)
  • Time 02:30 PM
  • Venue Conference Room B110
  • Presider Professor Been-Lon Chen
  • Speaker Professor Chih-Fang Lai
  • Background Professor Lai received his Ph.D. from National Taiwan University in 2014. He is currently an Assistant Professor of Economics at Soochow University. His research interests include macroeconomics, economic growth and development.
  • Abstract This paper studies how the introduction of consumption externalities affects the optimality of the human and physical capital accumulation in an economy displaying dynastic altruism. When the bequest motive is operative, consumption externalities only cause an intratemporal misallocation of consumption. Competitive equilibrium either under-accumulates both physical and human capital or over-accumulates both. Thus, education subsidy and pension are not needed at the same time in either case. When the bequest motive is inoperative, consumption externalities affect the intergenerational allocation and thus modify the intertemporal path of physical and human capital. Competitive equilibrium could under- or over-accumulates physical and human capital in opposite directions. Thus, education subsidy and pension could be both the optimal policies.