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Economic Growth in a Two-Agent Economy

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  • Fernando Tohmé
  • Carlos Dabús
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    Abstract

    This paper presents a two-agent economy, in which each agent has a consumption-dependent time preference. The optimal dynamic paths of accumulation will tend to one of many possible steady states, depending on the location of the initial capital level. One of the main results of this model arises in comparison with single-agent models. More precisely, one possible instance of the model consists of a case in which the two agents are such that without interaction one would become “rich” and the other “poor”. However, since they share a single production unit, a potential poverty trap may become averted.

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    Bibliographic Info

    Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c014_043.

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    Length: 26 pages
    Date of creation: Jun 2009
    Date of revision:
    Handle: RePEc:deg:conpap:c014_043

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    1. Iwai, Katsuhito, 1972. "Optimal economic growth and stationary ordinal utility --A fisherian approach," Journal of Economic Theory, Elsevier, vol. 5(1), pages 121-151, August.
    2. Boud, John III, 1990. "Recursive utility and the Ramsey problem," Journal of Economic Theory, Elsevier, vol. 50(2), pages 326-345, April.
    3. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
    4. Azariadis, Costas & Stachurski, John, 2005. "Poverty Traps," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 5 Elsevier.
    5. Martin J Osborne & Ariel Rubinstein, 2009. "A Course in Game Theory," Levine's Bibliography 814577000000000225, UCLA Department of Economics.
    6. 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.
    7. Michael Stern, 2006. "Endogenous time preference and optimal growth," Economic Theory, Springer, vol. 29(1), pages 49-70, September.
    8. Rolf Mantel, 1995. "Why the rich get richer and the poor get poorer," Estudios de Economia, University of Chile, Department of Economics, vol. 22(2 Year 19), pages 177-205, December.
    9. Rolf Mantel, 1995. "Why the Rich Get Richer and the Poor Get Poorer," Working Papers 9, Universidad de San Andres, Departamento de Economia, revised Mar 1995.
    10. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
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