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Borrowing constraints, parental altruism and welfare

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  • Soares, Jorge
Abstract
This paper investigates the welfare impact of a borrowing constraint that does not allow children to borrow against future income. In an overlapping-generations model with altruistic parents, the inability to borrow increases children’s savings and parental transfers, raising children’s welfare as well as average welfare in the short-run and in the long-run.

Suggested Citation

  • Soares, Jorge, 2015. "Borrowing constraints, parental altruism and welfare," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 1-20.
    • Handle: RePEc:eee:jmacro:v:45:y:2015:i:c:p:1-20
    DOI: 10.1016/j.jmacro.2015.03.001
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    Cited by:

    1. Lesly Cassin, 2018. "The effects of migration and pollution externality on cognitive skills in Caribbean economies: a Theoretical analysis," EconomiX Working Papers 2018-30, University of Paris Nanterre, EconomiX.
    2. Jorge Soares, 2010. "Welfare Impact Of A Ban On Child Labor," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 1048-1064, October.
    3. Wenhua Di & Carla Fletcher & Jeff Webster, 2022. "A Rescue or a Trap?—An Analysis of Parent PLUS Student Loans," Working Papers 2217, Federal Reserve Bank of Dallas.
    4. Ionescu, Felicia & Simpson, Nicole, 2010. "Credit Scores and College Investment," Working Papers 2010-07, Department of Economics, Colgate University.
    5. Soares, Jorge, 2015. "Borrowing constraints, parental altruism and welfare," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 1-20.
    6. Reichlin, Pietro, 2018. "Socially Optimal Wealth Inequality," CEPR Discussion Papers 12873, C.E.P.R. Discussion Papers.
    7. Pietro Reichlin, 2020. "Social welfare, parental altruism, and inequality," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1391-1419, September.

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    More about this item

    Keywords

    Borrowing constraint; Altruism; Overlapping generations; Welfare; Children;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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