Cross-Dynastic Intergenerational Altruism

Abstract

This paper studies whether saving behavior may reveal socially relevant intertemporal preferences. I decompose the present generation's preference for the next into its dynastic and cross-dynastic counterparts. Welfare weights on other dynasties can be motivated by a concern for sustainability or if descendants may move or marry. With such cross-dynastic intergenerational altruism, saving for one's descendants benefits present members of other dynasties, giving rise to preference externalities. I find that socially relevant intertemporal preferences may not be inferred from saving behavior if there is cross-dynastic intergenerational altruism. I also show that the external effect of present saving decreases over time.