Optimal Growth with Variable Rate of Time Preference
AbstractIn this paper we develop a continuous time infinite horizon optimal growth model with identical households, where the households' rate of time preference is endogenously determined. However, unlike the existing literature, we assume here that the instantaneous discount rate of the representative household is negatively related to its current consumption. With this assumption, we analyze the long run dynamic behaviour of the economy. We show that contrary to the general belief, a negative relationship between the instantaneous discount rate and the household's current consumption does not necessarily result in instability of the dynamic system. We derive a set of sufficient conditions for stability and instability in this context. We also show the possible existence of a poverty trap such that if an economy starts with a per capita income below a certain critical minimum value, then it optimally chooses a consumption-accumulation path such that it faces economic retrogression over time.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 70.
Length: 41 pages
Date of creation: Dec 1999
Date of revision:
Find related papers by JEL classification:
- D90 - Microeconomics - - Intertemporal Choice - - - General
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Das, Mausumi, 2003. "Optimal growth with decreasing marginal impatience," Journal of Economic Dynamics and Control, Elsevier, vol. 27(10), pages 1881-1898, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vinayan. K.P).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.