MICRO/THEORY: Stationary Altruism and Time Consistency; Dr Xiangyu Qu (CNRS, Centre d’Economie de la Sorbonne)

Abstract:

We study social intertemporal decisions where individuals differ in their time discount functions and instantaneous utility functions. We introduce a Pareto condition that ensures both the social discount functions and the instantaneous utility are convex combinations of those of the individuals. Our findings indicate that if individuals are time-consistent, the only way for a society to maintain time-consistency while avoiding dictatorship is by adhering to this Pareto condition, which applies to biperiodic consumption streams. Additionally, we demonstrate that the social discount factor emerges as a convex combination of individual factors. Conversely, a society that follows our Pareto condition with multi-periodic consumption streams exhibits decreasing impatience. Finally, we observe that, subject to mild constraints, increasng the number of periods allowed by our Pareto condition results in a society that becomes more decreasingly impatient.

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