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Endogenous discounting via wealth, twin-peaks and the role of technology

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  • SCHUMACHER, Ingmar

Abstract

The article gives new answers to the two following questions: One, what can be a potential source of the twin-peaks of economic growth? Two, why were some of the countries that were believed to belong to the group of low steady state countries (like Taiwan, South Korea, Japan, etc.) able to reach a convergence path which led them to a high steady state? We endogenize the time preference rate via a broad measure of wealth and provide empirical evidence that wealth affects the discount rate negatively. We provide sufficient conditions for multiplicity of equilibria and demonstrate how endogenous discounting via wealth leads to the twin-peaks of economic growth. We prove that improvements in technology can help avoid the Twin-Peaks.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006104.

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Date of creation: 00 Nov 2006
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Handle: RePEc:cor:louvco:2006104

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Keywords: endogenous time preference; recursive utility; twin-peaks of economic growth;

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References

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Citations

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Cited by:
  1. Yanase, Akihiko, 2011. "Impatience, pollution, and indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 35(10), pages 1789-1799, October.
  2. Strulik, Holger, 2012. "Patience and prosperity," Journal of Economic Theory, Elsevier, vol. 147(1), pages 336-352.
  3. Schumacher, Ingmar, 2011. "Endogenous discounting and the domain of the felicity function," Economic Modelling, Elsevier, vol. 28(1-2), pages 574-581, January.
  4. SCHUMACHER, Ingmar, 2006. "On optimality, endogenous discounting and wealth accumulation," CORE Discussion Papers 2006103, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Vollmer, Sebastian & Holzmann, Hajo & Schwaiger, Florian, 2010. "Peaks vs. Components," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-452, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  6. Kirill Borissov, 2013. "The existence of equilibrium paths in an AK-model with endogenous time preferences and borrowing constraints," EUSP Deparment of Economics Working Paper Series Ec-01/13, European University at St. Petersburg, Department of Economics.

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