Intergenerational altruism and the transfer paradox in an overlapping generations model

• We investigate the effect of intergenerational altruism on the transfer paradox.
• We focus on the transfer paradox in a one-sector overlapping generations model.
• The intergenerational altruism only amplifies the transfer's effect in a steady state.
• It affects the condition for the transfer paradox to occur on the transition path.

This study investigates how intergenerational altruism affects the possibility of the transfer paradox occurring in a two-country, one-sector overlapping generations model. We derive the conditions under which the transfer paradox occurs in our model where a generation within each country has altruism toward the subsequent generation. Contrary to earlier results in the literature, we find that altruism does not enter the conditions under which the transfer paradox occurs in the steady state. Moreover, we show that although altruism affects the condition of the transfer paradox along the transition path, its effect on this condition vanishes as the economy converges to the steady state.