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Economic Growth and Endogenous Intergenerational Altruism

May 2003
Stanford King Center on Global Development Working Paper
166
By  Hillel Rapoport, Jean-Pierre Vidal

The recent literature on the endogenous formation of preferences has emphasized that while some preferences are more conducive to growth than others, economic growth also contributes to the formation of particular tastes (Becker, 1996). In this paper, we construct a neoclassical growth model where intergenerational altruism is endogenous and entails costly sacrifices on the part of parents to acquire that trait. While the acquisition of altruistic traits depends on the economic conditions, altruism determines the level of intergenerational bequests and ultimately the accumulation of physical capital and economic growth. We derive three main results from this general equilibrium framework. First, we show that individuals accumulate altruism in the long run whenever the ‘marginal degree of altruism’ is sufficiently high. Second, we find that the endogenous formation of altruism is more likely to occur at later stages of economic growth. Finally, we show that low interest rates are correlated with altruistic behavior; this is in contrast to previous research in a partial equilibrium framework (Mulligan, 1997).

Publication Keywords: 
Altruism
Economic Growth