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Self-control and savings

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  • Michel, Philippe
  • Vidal, Jean-Pierre

Abstract

We reconsider the well-established paradigm of a rational individual's choice of a consumption schedule, building on the idea that human beings devote resources to withstand their desire for immediate consumption, i.e. to become more patient, thereby making less remote the pleasure derived from deferred consumption. We construct an infinite-horizon model of a small open economy, in which individuals can accumulate a stock of personal capital that reduces the discount on future consumption. Personal capital captures the effect of a conumer's past experience and choices on his future utilities. Our main results are: i) when individuals are heterogenous with respect to ability to become patient all individuals exhibit the same rate of time preference in the long run; ii) effort is rewarded in the long run to the extent that individuals who need to make more effort to become patient are wealthier and enjoy a higher level of utility bin the steady state. The latter result stems from the complementarity between personal capital and deferred consumption. JEL Classification: E13

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0211.

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Date of creation: Jan 2003
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Handle: RePEc:ecb:ecbwps:20030211

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  1. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  2. Gary S. Becker & Robert J. Barro, 1986. "A Reformulation of the Economic Theory of Fertility," NBER Working Papers 1793, National Bureau of Economic Research, Inc.
  3. Chakrabarty Debajyoti, 2012. "Poverty Traps and Growth in a Model of Endogenous Time Preference," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-35, July.
  4. Abel, Andrew B, 1987. "Operative Gift and Bequest Motives," American Economic Review, American Economic Association, vol. 77(5), pages 1037-47, December.
  5. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, vol. 41(1), pages 68-95, February.
  6. Emmanuel Thibault, 2000. "Existence of equilibrium in an OLG model with production and altruistic preferences," Economic Theory, Springer, vol. 15(3), pages 709-715.
  7. 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.
  8. Weil, Philippe, 1987. "Love thy children : Reflections on the Barro debt neutrality theorem," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 377-391, May.
  9. Vidal, Jean-Pierre, 2000. "Capital Mobility in a Dynastic Framework," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 606-25, July.
  10. Becker, Robert A, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 375-82, September.
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Cited by:
  1. Hillel Rapoport & Jean-Pierre Vidal, 2003. "Economic Growth and Endogenous Intergenerational Altruism," Working Papers 2003-04, Department of Economics, Bar-Ilan University.
  2. Immordino, Giovanni & Padula, Mario, 2013. "Expropriation risk and discounting," Research in Economics, Elsevier, vol. 67(2), pages 145-156.

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