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A simple dynastic economy with parental time investment in children’s patience

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  • Haruyama, Tetsugen
  • Park, Hyun

Abstract

This article explores the dynamics of a general equilibrium when an individual’s rate of time preferences is endogenous in a dynastic competitive economy. We postulate that altruistic parents allocate time to make their children patient to improve their lifetime welfare. The paper shows multiplicity and instability of the competitive equilibrium. Local and global indeterminacy emerges due to complementarity between a balanced growth rate and parental time allocation. Indeterminacy implies income and growth disparity among generations. In contrast, a balanced growth path is unique and determinate in the corresponding social optimum. A unique social optimum introduces a potential policy instrument for stabilizing a cyclical competitive equilibrium.

Suggested Citation

  • Haruyama, Tetsugen & Park, Hyun, 2017. "A simple dynastic economy with parental time investment in children’s patience," Economic Modelling, Elsevier, vol. 61(C), pages 235-247.
    • Handle: RePEc:eee:ecmode:v:61:y:2017:i:c:p:235-247
    DOI: 10.1016/j.econmod.2016.12.012
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    Cited by:

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    2. Gahramanov, Emin & Hasanov, Rashad & Tang, Xueli, 2020. "Parental involvement and Children's human capital: A tax-subsidy experiment," Economic Modelling, Elsevier, vol. 85(C), pages 16-29.
    3. Li, Xuefeng & Yang, Han & Wang, Hui & Jia, Jin, 2020. "Family socioeconomic status and home-based parental involvement: A mediation analysis of parental attitudes and expectations," Children and Youth Services Review, Elsevier, vol. 116(C).

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    More about this item

    Keywords

    Bifurcations; Dynastic economy; Endogenous time preferences; Indeterminacy; Instability;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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