INTERGENERATIONAL ALTRUISM AND DISCOUNT FACTORS

Essay one, "Intergenerational Altruism and Utility Functions," investigates the functional form of the utility of an agent with intergenerational altruism. A major finding is the functional form of two-way altruism, i.e. one that extends towards parent and offspring. The obtained form indicates that a weight on the lifetime utility of a descendant or ancestor is geometrically declining as they are located further away from the agent in time. Parental altruism, grandparental altruism and utility-dependent altruism are also studied. Parental altruism leads to the familiar time-separable utility function in capital theory literature. Grandparental altruism, however, produces a time-inconsistent utility function while utility-dependent altruism leads to a utility function with a utility-dependent discount factor.;Essay three, "Household Formation and Resource Allocation: an Infinite Horizon Case," extends the model in the previous essay into an infinite horizon case. In the individual steady state, the marginal product of capital is equal to the reciprocal of the discount factor on a male offspring's utility. In the socially efficient allocation, the marginal product of capital equals the reciprocal of the sum of the discount factors of a male and a female offspring.;Essay four, "Information Content of Taxes and Real Economic Activity," addresses the problem of non-neutrality of debt issue on real economic activity. If the government possesses information superior to the public on its own future expenditures, taxes contain information which aids the public in estimating future government tax policies. If unforeseeable disturbances are present in the current tax level, the public misperceives the temporary disturbances as permanent shifts in the government's plans for future taxation. Accordingly, the former lead to a response in real economic activity through alterations in the public's expectations about their future tax burdens. (Abstract shortened with permission of author.).;Essay two, "Household Formation and the Failure of Intergenerational Resource Allocation," studies intergenerational allocation in the presence of households formed through marriage. A major result is the underaccumulation of capital due to the existence of a positive externality between the families sharing the same offspring household. One application of the model shows that parents' bias against a female offspring leads to the complete elimination of her bequests.