Altruism and beyond by Stark O.

By Stark O.

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In the event that land will not be transferred in the second period, earnings are guaranteed to be higher than those that would have accrued to bare labor. The analysis helps explain a number of stylized facts. Several empirical studies point to absence of a trend toward equality across countries except among the subset of the very wealthy countries (Romer [1986, 1990], Lucas [1988]). One reason for this nonconvergence could be that poor economies are locked in an incentive structure that operates to discourage human capital formation.

Such an outcome can only arise from the operation of the parental life expectancy effect since the negative children's life expectancy effect implies reduced investment in human capital by the children. We can likewise think of a situation where the life expectancy of the parents falls, that of the children rises, yet investment in human capital by the children declines. Any one of these scenarios could then provide a discriminating test between our model and the traditional human capital model.

A symmetric statement applies to the son. When preferences are additively separable and the consumption functions are strictly concave, all goods are normal goods and therefore a larger quantity of C, regardless of its distribution, is sure to raise the son's utility (see Becker [1974]). Finally, even though a rise in the intensity of the father's altruism entails larger transfers of corn to the son, how would the utilities of the father and his son be affected by such a rise? 10) ± the father's optimal choice ± we get CS ˆ F C and CF ˆ …1 À F †C.

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