On the cultural transmission of corruption

We provide a cultural explanation to the phenomenon of corruption in the framework of an overlapping generations model with intergenerational transmission of values. We show that under reasonable parameters the economy has two steady states which differ in their levels of corruption. The driving force in the equilibrium se1ection process is the education effort exerted by parents which depends on the initial distribution of ethics in the population and on expectations about policies in the future. We propose sorne policy interventions which via parents' efforts have long lasting effects on corruption and show the success of intensive education campaigns. We argue that our model exp1ains the differecnes which are observed across countries with similar degrees of economic development and that educating the young is a key element in reducing corruption successfully

On the cultural transmission of corruption.

We provide a cultural explanation to the phenomenon of corruption in the framework of an overlapping generations model with intergenerational transmission of values. We show that under reasonable parameters the economy has two steady states which differ in their levels of corruption. The driving force in the equilibrium se1ection process is the education effort exerted by parents which depends on the initial distribution of ethics in the population and on expectations about policies in the future. We propose sorne policy interventions which via parents' efforts have long lasting effects on corruption and show the success of intensive education campaigns. We argue that our model exp1ains the differecnes which are observed across countries with similar degrees of economic development and that educating the young is a key element in reducing corruption successfully.Corruption; Cultural transmission; Overlapping generations; Principal-agent;

Intergenerational Redistribution, Health Care, and Politics

Publicly provided health care implies considerable intergenerational redistribution. The possibility of accumulating a fund or debt will affect the degree of redistribution as well as how efficient the financing of health care is. In a voting model we study how governments inability to make binding long-term policy commitments will affect the accumulation of a fund or debt. Today's government will base its policy decisions on expectations about future governments behavior and simply follow suit, which results in strong political inertia. Either a fund or debt may therefore be upheld in political equilibrium. But no mechanism ensure that it is at its optimal level. If there is fund in steady state, the more political clout the old have the smaller will the fund be, i.e saving decrease. If there is debt, however, a politically stronger old generation may imply a smaller debt, i.e. savings increase.Voting; health expenditure; intergenerational transfers; dynamic politics

Welfare Foundations of Discounting

We investigate whether temporal preferences expressed as a sum of discounted consumption utilities can be derived from a welfare representation in the form of a sum of discounted total utilities. We find that a consumption-based representation in the usual exponential form corresponds to one-period "altruism" towards one's future selves: the current self gives positive weight to her total utility in the next period, and weight zero to her total utility in all subsequent periods. We also find that a consumption-based representation in the quasi-exponential (ß,d)-form suggested by Phelps and Pollak (1968) and Laibson (1997) correspond to quasi-exponential altruism towards one's future selves. For ß=1/2, the welfare weights are exponential, while for ß 1/2 in favor of one's future selves. More generally, we establish a functional equation which relates welfare weights to consumption-utility weights. We also postulate five desiderata for consumption-utility weights. None of the usual formalizations satisfy all desiderata, but we propose a simple formalization which does.Altruism; Discounting; Dynamic Inconsistency; Time Inconsistency; Welfare 

Discounting and Future Selves

Is discounting of future instantaneous utilities consistent with altruism towards future selves? More precisely, can temporal preferences, expressed as a sum of discounted instantaneous utilities, be derived from a representation in the form of a sum of discounted total utilities? We find that a representation in the quasi-exponential (ß,d)-form in Phelps and Pollak (1968) and Laibson (1997) correspond to quasi-exponential altruism towards one's future selves. For ß=1/2, these welfare weights are exponential, while for ß 1/2 in favor of one's future selves. More generally, we establish a functional equation which relates welfare weights to instantaneous-utility weights and apply this equation to a number of examples. We also postulate five desiderata for instantaneous-utility discounting. None of the usual discount functions satisfy all desiderata, but we propose a simple class of discount functions which does.Altruism; Discounting; Dynamic Inconsistency; Welfare 

Cultural transmission and discrimination

Each worker belongs to either the majority or the minority group and, irrespective of the group she belongs to, can have good or bad work habits. These traits are transmitted from one generation to the next through a learning and imitation process which depends on parents' purposeful investment on the trait and the social environment where children live. In a segregated society, we show that, if a high enough proportion of employers have taste-based prejudices against minority workers, their prejudices are always self-fulfilled in steady state. Affirmative Action improves the welfare of minorities without affecting majority workers whereas integration is beneficial to minority workers but detrimental to workers from the majority group. If Affirmative Action quotas are high enough or integration is strong enough, employers' negative stereotypes cannot be sustained in steady-state

Peers and Culture

We analyze the evolution of cultural traits when parents purposefully invest resources in order to socialize their children to the cultural traits that maximize child lifetime utility. We assume that children are not passive in their adoption of traits from peers. Instead they are guided by an evaluation of the merit of traits. We show that such evaluation is likely to render this process of oblique transmission biased. We then show that when transmission of traits from society is biased or frequency dependent, cultural diversity is sustainable even when all parents strive to transmit the same trait. We also show that demand for cultural pluralism on the part of parent does not guarantee cultural diversity

Intergenerational redistribution, health care and politics

Publicly provided health care implies considerable intergenerational redistribution. The possibility of accumulating a fund or debt will affect the degree of redistribution as well as how efficient the financing of health care is. In a voting model we study how governments inability to make binding long-term policy commitments will affect the accumulation of a fund or debt. Today's government will base its policy decisions on expectations about future governments behavior and simply follow suit, which results in strong political inertia. Either a fund or debt may therefore be upheld in political equilibrium. But no mechanism ensure that it is at its optimal level. If there is fund in steady state, the more political clout the old have the smaller will the fund be, i.e saving decrease. If there is debt, however, a politically stronger old generation may imply a smaller debt, i.e. savings increase

Peers and Culture

We analyze the evolution of culture when parents socialize children to the culturalnvariants that maximize child lifetime utility. Parents invest in cultural transmissionntaking into account that children are also influenced by peers. We model the influence of peers by assuming that children observe different cultural variants in their peer group, assign merit to them and adopt one variant, following a probabilistic adoption rule. We show that cultural diversity is sustainable even if all parents strive to transmit the same variant. We also show that a parental demand for cultural pluralism does not guarantee cultural diversity

Peers and Culture

We analyze the evolution of cultural traits when parents purposefully invest resources in order to socialize their children to the cultural traits that maximize child lifetime utility. We assume that children are not passive in their adoption of traits from peers. Instead they are guided by an evaluation of the merit of traits. We show that such evaluation is likely to render this process of "oblique transmission" biased. We then show that when transmission of traits from society is biased or frequency dependent, cultural diversity is sustainable even when all parents strive to transmit the same trait. We also show that demand for cultural pluralism on the part of parent does not guarantee cultural diversity.Peer Groups; Cultural Transmission; Cultural Diversity; Oblique Transmission