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Time Discounting, Education, and Growth: Evidence and a Simple Model

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Abstract

In the paper we propose a new channel through which education may promote economic growth: education makes people more patient, and more patient people are more likely to save, invest, or send children to school. The paper first summarizes the results of field studies which we conducted in two very different poor countries: Uganda and India. In both countries the findings are consistent with the causal effect of education on the subjective discount rate. In the second part of the paper, we build a simple two-period human-capital-driven growth model where the subjective discount rate depends on the level of human capital. This new assumption gives rise to the possibility of multiple development regimes and the model illustrates a wider role of education in tackling possible development traps.

Suggested Citation

  • Michal Bauer & Julie Chytilová, 2009. "Time Discounting, Education, and Growth: Evidence and a Simple Model," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(1), pages 71-86, January.
  • Handle: RePEc:fau:fauart:v:59:y:2009:i:1:p:71-86
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    Cited by:

    1. Evangelos V. Dioikitopoulos & Sarantis Kalyvitis, 2015. "Optimal Fiscal Policy with Endogenous Time Preference," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 848-873, December.

    More about this item

    Keywords

    growth; human capital; education; time discounting; poverty;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • I2 - Health, Education, and Welfare - - Education
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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