Paternal Altruism or Smart Parent Altruism? Paternal Altruism or Smart Parent Altruism?

If the bene ciary of an altruist's gift can be expected to use this gift e ciently, then a pure altruist (one who cares about the bene ciary's utility level, but not how utility is obtained) should only give gifts of money. This is often interpreted to mean that any other type of gift is evidence of paternal altruism. However, it is known (Linbeck and Weibull (1988)) that altruism creates an incentive for ine cient consumption in a multiperiod model. Working within this context, I demonstrate that it can be optimal for a pure altruist to give certain types of gifts in kind. For example, a gift in kind of education increases the bene ciary's future income, which can prevent the type of strategic behavior which leads to ine ciency in Linbeck and Weibull (1998.) Paternal Altruism or Smart Parent Altruism? Jack Robles Department of Economics University of Colorado Boulder, CO 80309 Campus Box 256 phone: (303) 492-7407 email: [email protected] First Draft January 4, 1998 Revised July 26, 1998