FISCAL-POLICY AND ENDOGENOUS GROWTH IN A BEQUEST-CONSTRAINED ECONOMY

Evidence suggests that the vast majority of planned altruistic transfe rs between generations are human capital investments in children (hous eholds are generally bequest-constrained). This paper demonstrates tha t empirically-based calibrations of simple overlapping generations mod els with altruism generate binding bequest constraints with realistic endogenous growth rates and returns to capital. We also show how inter generational and intragenerational redistributions of wealth affect lo ng-run growth in bequest-constrained economies. Redistribution is a fe ature of fiscal policy abstracted away from by the standard infinitely -lived representative agent models used to analyze endogenous growth.