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Endogenous Discounting via Wealth, Twin-Peaks and the Role of Technology

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  • Ingmar, SCHUMACHER

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

Abstract

The articles gives new answers to the following questions : One, what can be potential source of the twin-peaks of economi 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, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2006059.

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Length: 18
Date of creation: 01 Nov 2006
Date of revision:
Handle: RePEc:ctl:louvec:2006059

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Keywords: Endogenous time preference; Recursive utility; Twin-peaks of economic growth;

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  1. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
  2. 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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Citations

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Cited by:
  1. Ingmar Schumacher, 2013. "The endogenous formation of an environmental culture," CEEES Paper Series CE3S-04/13, European University at St. Petersburg, Department of Economics.
  2. Ingmar, SCHUMACHER, 2006. "On optimality, endogeneous discounting and wealth accumulation," Discussion Papers (ECON - Département des Sciences Economiques) 2006058, Université catholique de Louvain, Département des Sciences Economiques.
  3. Sebastian Vollmer & Hajo Holzmann & Florian Schwaiger, 2013. "Peak vs Components," Review of Development Economics, Wiley Blackwell, vol. 17(2), pages 352-364, 05.
  4. repec:ipg:wpaper:13 is not listed on IDEAS
  5. Strulik, Holger, 2012. "Patience and prosperity," Journal of Economic Theory, Elsevier, vol. 147(1), pages 336-352.
  6. 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.
  7. 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.
  8. 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.
  9. Yanase, Akihiko, 2011. "Impatience, pollution, and indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 35(10), pages 1789-1799, October.
  10. 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.
  11. Schumacher, Ingmar, 2011. "Endogenous discounting and the domain of the felicity function," Economic Modelling, Elsevier, vol. 28(1-2), pages 574-581, January.

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