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The Neoclassical Growth Model with Heterogeneous Quasi-Geometric Consumers

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  • Maliar, Lilia
  • Maliar, Serguei

Abstract

This paper investigates how the assumption of quasi-geometric (hyperbolic) discounting affects the distributional implications of the standard one-sector neoclassical growth model with infinitely lived heterogeneous agents. The agents are subject to idiosyncratic shocks and face borrowing constraints. We confine attention to an interior Markov recursive equilibrium. The consequence of quasi-geometric discounting is that the effective discount factor of an agent is not a constant, but an endogenous variable which depends on the agent's current state. We show, both analytically and by simulation, that this new feature can significantly affect the distributional implications of the neoclassical growth model.

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File URL: http://dx.doi.org/10.1353/mcb.2006.0045
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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 38 (2006)
Issue (Month): 3 (April)
Pages: 635-654

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Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:3:p:635-654

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  18. Robert J. Barro, 1999. "Ramsey Meets Laibson In The Neoclassical Growth Model," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1125-1152, November.
  19. Lilia Maliar & Serguei Maliar, 2003. "Solving The Neoclassical Growth Model With Quasi-Geometric Discounting: Non-Linear Euler-Equation Models," Working Papers. Serie AD 2003-23, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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Cited by:
  1. Boyarchuk, Dmytro & Maliar, Lilia & Maliar, Serguei, 2005. "The consumption and welfare implications of wage arrears in transition economies," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 540-564, September.
  2. Lilia Maliar & Kateryna Garmel & Serguei Maliar, 2005. "The Eu Eastern Enlargement And Fdi: The Implications From A Neoclassical Growth Model," Working Papers. Serie AD 2005-29, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  3. Maliar, Lilia & Maliar, Serguei & Valli, Fernando, 2010. "Solving the incomplete markets model with aggregate uncertainty using the Krusell-Smith algorithm," Journal of Economic Dynamics and Control, Elsevier, vol. 34(1), pages 42-49, January.
  4. Garmel, Kateryna & Maliar, Lilia & Maliar, Serguei, 2008. "EU eastern enlargement and foreign investment: Implications from a neoclassical growth model," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 307-325, June.
  5. Lilia Maliar & Serguei Maliar, 2005. "Solving the Neoclassical Growth Model with Quasi-Geometric Discounting: A Grid-Based Euler-Equation Method," Computational Economics, Society for Computational Economics, vol. 26(2), pages 163-172, October.
  6. Lilia Maliar & Serguei Maliar, 2003. "Heterogeneity In The Degree Of Quasi-Geometric Discounting: The Distributional Implications," Working Papers. Serie AD 2003-28, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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