Presented with the opportunity to trade, countries bene…t by specializing in the activities they do relatively better. This …nding, the principle of comparative advantage, is one of the …rst analytic results in economics. While Adam Smith (1776) made a much earlier case for free trade, he based it on increasing returns to scale, and provided no formal demonstration. In contrast, David Ricardo (...

Several important empirical studies (for example, Altonji, Hayashi, and Kotlikoff, 1992, 1996, 1997) have found that households are not altruistically linked in a way consistent with the standard Ricardian model, as put forward by Barro (1974). We built a two-sided altruistic-linkage model in which private transfers are made in the presence of two types of shocks: an observable shock that is pu...

In recent years there has been a growing controversy concerning the effective role of distributional policy in economies in which agents hold altruistic preferences. We show that in order to establish cross sectional Distributional Neutrality households require information on consanguinity links prior to making their decisions on consumption and bequests. If such information is not available du...