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Zhang, Lin
Ikeda, Shinsuke
Year of Publication: 
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 890
We propose a model of parental altruism in relation with child habit formation, where children are unaware of their developing habits while young, and become cognizant of them only on growing up. We show that an altruistic mother (i) maintains the amount of income transferred to her child lower than the child would desire and (ii) reduces further income transfer upon an exogenous increase in the child's performance of a particular habit. The child, when grown, may end up grateful for the small income transfer if the mother is sufficiently rich and altruistic: when evaluated by the realized habitual preferences, a small income transfer leads to greater child welfare than the greater income transfer preferred by the child would have generated. This implies that parents from richer families, ceteris paribus, tend to guard against their children's profligacy.
habit formation
parental altruism
time preference
Document Type: 
Working Paper

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