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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. Vollmer, Sebastian & Holzmann, Hajo & Schwaiger, Florian, 2010. "Peaks vs. Components," Hannover Economic Papers (HEP) dp-452, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Strulik, Holger, 2009. "Patience and Prosperity," Hannover Economic Papers (HEP) dp-426, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  3. Strulik, Holger, 2013. "Limited self-control and long-run growth," Center for European, Governance and Economic Development Research Discussion Papers 181, University of Goettingen, Department of Economics.
  4. Kirill Borissov, 2011. "Growth and Distribution in a Model with Endogenous Time Peferences and Borrowing Constraints," DEGIT Conference Papers c016_073, DEGIT, Dynamics, Economic Growth, and International Trade.
  5. Ingmar Schumacher, 2013. "The endogenous formation of an environmental culture," Working Papers 2013-013, Department of Research, Ipag Business School.
  6. Yanase, Akihiko, 2011. "Impatience, pollution, and indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 35(10), pages 1789-1799, October.
  7. 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).
  8. Strulik, Holger, 2013. "Hyperbolical discounting and endogenous growth," Center for European, Governance and Economic Development Research Discussion Papers 175, University of Goettingen, Department of Economics.
  9. 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.
  10. repec:ipg:wpaper:13 is not listed on IDEAS
  11. Schumacher, Ingmar, 2011. "Endogenous discounting and the domain of the felicity function," Economic Modelling, Elsevier, vol. 28(1), pages 574-581.

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