This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

On optimality, endogenous discounting and wealth accumulation

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
SCHUMACHER, Ingmar

Additional information is available for the following registered author(s):

Abstract

We endogenize the discount rate via a broad measure of wealth and provide empirical evidence that wealth affects the discount rate negatively. We demonstrate that the Pontryagin conditions require positive felicity for intuitive results, whereasthe concavity of the Hamiltonian requires negative felicity for optimality. This dilemma also holds for the endogenizations of Obstfeld (1990) and followers. We solve the model with positive felicity and resolve when optimality is possible. We discussthe impact on technological change, savings and convergence which are more in line with empirics. Finally, we discuss time consistency of a planner who cannot predict his preferences.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.core.ucl.ac.be/services/psfiles/dp06/dp2006_103.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006103.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 01 Nov 2006
Date of revision:
Handle: RePEc:cor:louvco:2006103

Contact details of provider:
Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
Phone: 32(10)474321
Fax: +32 10474301
Email:
Web page: http://www.uclouvain.be/core
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Alain GILLIS).

Related research
Keywords: endogenous time preference; stability; optimal growth; recursive utility;

Other versions of this item:

Find related papers by JEL classification:
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Becker, Robert A & Boyd, John H, III, 1992. "Recursive Utility and Optimal Capital Accumulation II: Sensitivity and Duality Theory," Economic Theory, Springer, vol. 2(4), pages 547-63, October.
  2. Shi, Shouyong & Epstein, Larry G, 1993. "Habits and Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 61-84, February. [Downloadable!] (restricted)
  3. Anne Case & Darren Lubotsky & Christina Paxson, 2002. "Economic Status and Health in Childhood: The Origins of the Gradient," American Economic Review, American Economic Association, vol. 92(5), pages 1308-1334, December. [Downloadable!]
    Other versions:
  4. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February. [Downloadable!] (restricted)
  5. N. Gregory Mankiw, 1995. "The Growth of Nations," Harvard Institute of Economic Research Working Papers 1732, Harvard - Institute of Economic Research.
    Other versions:
  6. Carroll, Christopher D, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 1-55, February.
    Other versions:
  7. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. de Walque, Damien, 2004. "Education, information, and smoking decisions : evidence from smoking histories, 1940-2000," Policy Research Working Paper Series 3362, The World Bank. [Downloadable!]
  9. Rodolfo M. Nayga Jr, 2001. "Effect of Schooling on Obesity: Is Health Knowledge a Moderating Factor?," Education Economics, Taylor and Francis Journals, vol. 9(2), pages 129-137, August. [Downloadable!] (restricted)
  10. Michael Grossman, 2005. "Education and Nonmarket Outcomes," NBER Working Papers 11582, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, vol. 41(1), pages 68-95, February. [Downloadable!] (restricted)
  12. dÕASPREMONT, Claude & GEVERS, Louis, 2001. "Social welfare functionals and interpersonal comparability," CORE Discussion Papers 2001040, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  13. Brunner, Martin & Strulik, Holger, 2002. "Solution of perfect foresight saddlepoint problems: a simple method and applications," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 737-753, May. [Downloadable!] (restricted)
    Other versions:
  14. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  15. Rabah Amir, 1985. "A Characterization of Globally Optimal Paths in the Non-Classical Growth Model," Cowles Foundation Discussion Papers 754, Cowles Foundation, Yale University. [Downloadable!]
  16. Samwick, Andrew A., 1998. "Discount rate heterogeneity and social security reform," Journal of Development Economics, Elsevier, vol. 57(1), pages 117-146, October. [Downloadable!] (restricted)
    Other versions:
  17. Dechert, W. Davis & Nishimura, Kazuo, 1983. "A complete characterization of optimal growth paths in an aggregated model with a non-concave production function," Journal of Economic Theory, Elsevier, vol. 31(2), pages 332-354, December. [Downloadable!] (restricted)
  18. Banerjee, Abhijit V & Newman, Andrew F, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 211-35, April. [Downloadable!] (restricted)
    Other versions:
  19. Ryder, Harl E, Jr & Heal, Geoffrey M, 1973. "Optimum Growth with Intertemporally Dependent Preferences," Review of Economic Studies, Blackwell Publishing, vol. 40(1), pages 1-33, January. [Downloadable!] (restricted)
  20. Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation, Yale University. [Downloadable!]
  21. Pritchett, Lant & Summers, Lawrence H., 1993. "Wealthier is healthier," Policy Research Working Paper Series 1150, The World Bank. [Downloadable!]
  22. SCHUMACHER, Ingmar, 2006. "Endogenous discounting via wealth, twin-peaks and the role of technology," CORE Discussion Papers 2006104, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  23. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May. [Downloadable!] (restricted)
    Other versions:
  24. David Fielding & Sebastian Torres, 2009. "Health, Wealth, Fertility, Education, and Inequality," Review of Development Economics, Blackwell Publishing, vol. 13(1), pages 39-55, 02. [Downloadable!] (restricted)
  25. Obstfeld, Maurice, 1990. "Intertemporal dependence, impatience, and dynamics," Journal of Monetary Economics, Elsevier, vol. 26(1), pages 45-75, August. [Downloadable!] (restricted)
    Other versions:
  26. repec:fth:harver:1504 is not listed on IDEAS
  27. Michel, P., 1980. "On the Transversality Condition in Infinite Horizon Optimal Problems," Cahiers de recherche 8024, Universite de Montreal, Departement de sciences economiques.
    Other versions:
  28. Epstein, Larry G & Hynes, J Allan, 1983. "The Rate of Time Preference and Dynamic Economic Analysis," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 611-35, August. [Downloadable!] (restricted)
  29. Kenkel, Donald S, 1991. "Health Behavior, Health Knowledge, and Schooling," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 287-305, April. [Downloadable!] (restricted)
    Other versions:
  30. Sander, William, 1995. "Schooling and Quitting Smoking," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 191-99, February. [Downloadable!] (restricted)
  31. Das, Mausumi, 2003. "Optimal growth with decreasing marginal impatience," Journal of Economic Dynamics and Control, Elsevier, vol. 27(10), pages 1881-1898, August. [Downloadable!] (restricted)
  32. Le Kama, Alain Ayong & Schubert, Katheline, 2007. "A Note On The Consequences Of An Endogenous Discounting Depending On The Environmental Quality," Macroeconomic Dynamics, Cambridge University Press, vol. 11(02), pages 272-289, April. [Downloadable!]
    Other versions:
  33. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
Full references

Statistics
Access and download statistics

Did you know? It is the publishers that input data about their publications, as there is no staff at RePEc.

This page was last updated on 2009-11-19.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.