The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice

• Main Authors: Carlos Córdoba, J. (Author), Ripoll, M. (Author)
• Format: Article
• Language: English
• Published: Oxford University Press 2019
• Subjects: altruism; Altruism; calibration; conceptual framework; consumption behavior; Economic value of a child; fertility; Intergenerational substitution; Intertemporal substitution; macroeconomics; model test; Non-separable utility; parental care; theoretical study; United States
• Online Access: View Fulltext in Publisher

 Dynastic models common in macroeconomics use a single parameter to control the willingness of individuals to substitute consumption both intertemporally, or across periods, and intergenerationally, or across parents and their children. This article defines the concept of elasticity of intergenerational substitution (EGS), and extends a standard dynastic model in order to disentangle the EGS from the EIS, or elasticity of intertemporal substitution. A calibrated version of the model lends strong support to the notion that the EGS is significantly larger than one. In contrast, estimates of the EIS suggests that it is at most one. What disciplines the identification is the need to match empirically plausible fertility rates for the U.S. We illustrate the potential role of the EGS in macroeconomics. © 2018 The Author(s) 2018.