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On a two-sector endogenous growth model with quasi-geometric discounting

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  • Hiraguchi, Ryoji

Abstract

We study a two-sector endogenous growth model with quasi-geometric discounting in which human capital is the engine of growth. We show that a planning economy welfare-dominates a competitive economy and time-consistent government policy is welfare-improving if the agents are sufficiently patient. The government policy consists of a tax on physical capital income and a subsidy on human capital accumulation. Our results differ from those of existing one-sector models with quasi-geometric discounting in which a competitive economy always outperforms a planning economy and the government’s time-consistent tax policies reduce equilibrium welfare.

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  • Hiraguchi, Ryoji, 2016. "On a two-sector endogenous growth model with quasi-geometric discounting," Journal of Mathematical Economics, Elsevier, vol. 65(C), pages 26-35.
    • Handle: RePEc:eee:mateco:v:65:y:2016:i:c:p:26-35
    DOI: 10.1016/j.jmateco.2016.05.004
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    Cited by:

    1. Maeda, Daiki, 2018. "Quasi-geometric discounting in cash-in-advance economy," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 51-56.

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