TY  - JOUR
AU  - Kotlikoff,Laurence J.
AU  - Razin,Assaf
AU  - Rosenthal,Robert W.
TI  - A Strategic Altruism Model In Which Ricardian Equivalence Does Not Hold
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2699
PY  - 1991
Y2  - August 1991
UR  - http://www.nber.org/papers/w2699
L1  - http://www.nber.org/papers/w2699.pdf
N1  - Author contact info:
Laurence J. Kotlikoff
Department of Economics
Boston University
270 Bay State Road
Boston, MA 02215
Tel: 617/353-4002
Fax: 617/353-4001
E-Mail: kotlikoff@gmail.com

Assaf Razin
Department of Economics
Cornell University
Uris 422
Ithaca, NY 14853
Tel: 607/255-9625
Fax: 607/255-2818
E-Mail: ar256@cornell.edu
AB  - 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.
ER  -