TY  - JOUR
AU  - Altig,David
AU  - Davis,Steve J.
TI  - Borrowing Constraints and Two-Sided Altruism With an Application to Social Security
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3913
PY  - 1991
Y2  - November 1991
UR  - http://www.nber.org/papers/w3913
L1  - http://www.nber.org/papers/w3913.pdf
N1  - Author contact info:
David Altig
Federal Reserve Bank of Atlanta
1000 Peachtree St. NE
 Atlanta, GA 30309
Tel: 216-269-9079
E-Mail: David.Altig@atl.frb.org

Steven J. Davis
Booth School of Business
The University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-7312
Fax: 773/834-0733
E-Mail: Steven.Davis@ChicagoBooth.edu
AB  - We develop the implications of borrowing constraints and two-sided altruism in an overlapping generations framework with agents who live three periods. Our analysis identifies six equilibrium patterns of intertemporal and intergenerational linkages in the no-loan economy, one of which corresponds to the traditional lifecycle model, and one of which corresponds to Barro's dynastic model. Novel linkage patterns involve parent-to-child transfers early in the life cycle, child-to-parent gifts late in the life cycle, or both. Capital accumulation behavior and the consequences of fiscal policy interventions depend, often critically, on which linkage patterns prevails. We show how unfunded social security interventions can significantly depress aggregate capital accumulation, even when every generation is linked to its successor generation by altruistic transfers. We also derive a non-Ricardian neutrality result for gift-motive economies that holds whether or not borrowing constraints bind and whether or not parent and child are connected by an operative altruism motive at all points in the life cycle.
ER  -