Oct 10, 2023Liked by Jason Hausenloy, Duncan McClements
Thanks for writing this! Here are some further reflections:
As the paper points out, there is a lot of uncertainty associated with the Barro-Becker model and its parametrization, so one should probably not put too much weight on it. Moreover, the model was designed for the very specific purpose of explaining fertility choices/population growth; I would not necessarily expect it to be a very good model for estimating parent-to-child altruism.
For estimates of the intergenerational altruism parameter, it might be worth looking at is Schwarze and Winkelmann’s 2001-paper "Happiness and altruism within the extended family". They estimate that the intergenerational altruism parameter is between 0.04 and 0.25, using survey data from the German Socio-Economic Panel.
Another consideration that is worth mentioning is that the intergenerational altruism parameter, as used in the Barro-Becker model, also reflects discounting. The Barro-Becker model is not an overlapping-generations model: the parents live for 25 years and are then replaced by their children, who live to 25 years, etc. Therefore, in the model, parents' only opportunity for being altruistic is to give up some of their own current consumption and save it for the sake of their children's consumption in 25 years. A standard 2% rate of pure time preference on its own implies that utility in 25 years from now is valued at only 60% ≈ 0.98^25 of current utility.
Thanks for the reflections - I think they should be able to explain the results! Schwarze and Wilkelmann's paper tracks generational transfers after individuals have left their parents' homes: our confusion referred more to the surprisingly high level of consumption of children while they are much younger. If parental altruism fell with children's age then this would offer a way to reconcile the estimates as well: parents choose their number of children based on future utility, but choose consumption of themselves and their children in each year based on utility maximisation in that year. This hypothesis seems plausible as the Barro-Becker parameter you estimate once discounting is included is 0.15, compared to the about 0.085 (averaged over men and women) in their regression with full controls instruments etc: so assuming constant child consumption over their lifetime, 2% discount, 80 years of lifetime of which 20 are childhood this gives a coefficient of 0.25, which once some other effects are accounted for (greater concavity than log, scale economies in households, etc) should give an estimate for the current consumption of children as a fraction of their parents that is not too implausible.
Thanks for writing this! Here are some further reflections:
As the paper points out, there is a lot of uncertainty associated with the Barro-Becker model and its parametrization, so one should probably not put too much weight on it. Moreover, the model was designed for the very specific purpose of explaining fertility choices/population growth; I would not necessarily expect it to be a very good model for estimating parent-to-child altruism.
For estimates of the intergenerational altruism parameter, it might be worth looking at is Schwarze and Winkelmann’s 2001-paper "Happiness and altruism within the extended family". They estimate that the intergenerational altruism parameter is between 0.04 and 0.25, using survey data from the German Socio-Economic Panel.
Another consideration that is worth mentioning is that the intergenerational altruism parameter, as used in the Barro-Becker model, also reflects discounting. The Barro-Becker model is not an overlapping-generations model: the parents live for 25 years and are then replaced by their children, who live to 25 years, etc. Therefore, in the model, parents' only opportunity for being altruistic is to give up some of their own current consumption and save it for the sake of their children's consumption in 25 years. A standard 2% rate of pure time preference on its own implies that utility in 25 years from now is valued at only 60% ≈ 0.98^25 of current utility.
Thanks for the reflections - I think they should be able to explain the results! Schwarze and Wilkelmann's paper tracks generational transfers after individuals have left their parents' homes: our confusion referred more to the surprisingly high level of consumption of children while they are much younger. If parental altruism fell with children's age then this would offer a way to reconcile the estimates as well: parents choose their number of children based on future utility, but choose consumption of themselves and their children in each year based on utility maximisation in that year. This hypothesis seems plausible as the Barro-Becker parameter you estimate once discounting is included is 0.15, compared to the about 0.085 (averaged over men and women) in their regression with full controls instruments etc: so assuming constant child consumption over their lifetime, 2% discount, 80 years of lifetime of which 20 are childhood this gives a coefficient of 0.25, which once some other effects are accounted for (greater concavity than log, scale economies in households, etc) should give an estimate for the current consumption of children as a fraction of their parents that is not too implausible.
This looks like it could be interesting, but as a layman I am left wanting for more of an introduction of the referenced materials.