NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Strategic Altruism Model In Which Ricardian Equivalence Does Not Hold

Laurence J. Kotlikoff, Assaf Razin, Robert W. Rosenthal

NBER Working Paper No. 2699 (Also Reprint No. r1568)
Issued in September 1988
NBER Program(s):   PE

This article demonstrates that Ricardian Equivalence does not necessarily hold in models with altruistic transfers once one takes into account the strategic behavior of recipients as well as donors. To influence the final allocation of consumption in altruistic settings, potential recipients can threaten to refuse as well as accept transfers. We apply the Extended Nash Bargaining Solution to the problem of an altruistic parent and a possibly altruistic child. The parent and child first choose a threat point noncooperatively; this threat point then influences the final allocation of consumption through the standard Nash Bargaining Solution, While the potential recipient can refuse transfers from the potential donor, he cannot refuse transfers from the government. When the government redistributes between the parent and child, it changes their endowments and the equilibrium threats, and thus the final allocation of consumption. The feature of the cooperative model presented here that leads to the failure of Ricardian Equivalence may be characteristic of a wider class of cooperative and noncooperative altruism models. This feature is that noninterior strategic postures underlie interior transfer behavior and that these non- interior strategic postures are altered by government redistribution.

download in pdf format
   (211 K)

download in djvu format
   (127 K)

email paper

This paper is available as PDF (211 K) or DjVu (127 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2699

Published: The Economic Journal, Vol. 100, pp. 1261-1268, (December 1990).

Users who downloaded this paper also downloaded these:
Bernheim w2330 Ricardian Equivalence: An Evaluation of Theory and Evidence
Barro w5502 Reflections on Ricardian Equivalence
Feldstein w2062 The Effects of Fiscal Policies When Incomes are Uncertain: A Contradiction to Ricardian Equivalence
Abel w1983 The Failure of Ricardian Equivalence Under Progressive Wealth Taxation
Barro w2685 The Ricardian Approach to Budget Deficits
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us