Rational bubbles in altruistic economies: when Tirole meets Ramsey
Stefano Bosi
(University of Evry Paris-Saclay)
&
Thai Ha-Huy
(University of Evry Paris-Saclay)
&
Ngoc-Sang Pham
(EM Normandie Business School)
We consider an overlapping generations model à la Tirole (1985) augmented with altruism from parents to children as
in Barro (1974). We compute the global dynamics and we show that, in the case of low altruism, bequests are zero
and our model works exactly as the Tirole's model (1985) where rational bubbles can arise, while, in the case of high
altruism, bequests are positive and bubbles are ruled out. This result holds whatever the share of altruistic agents in
total population. Our contribution raises the question of the robustness of Tirole's conclusion about the existence of
rational bubbles under a large degree of altruism.
