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Endogenous Time Preference and Endogenous Growth

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  • Howell H. Zee

Abstract

The present paper develops a one-sector aggregate endogenous growth model with intertemporal preference dependence. The resultant model possesses the fundamental property of growth convergence, in the sense that countries with identical parameters regarding technology, preference, and government policy will converge to a steady state with the same (positive) growth rate. A notable tax policy implication of the model is that, even in the absence of externalities, the growth effects of an income tax are shown to be a priori ambiguous and dependent on the relative magnitudes of the tax rate and the tax elasticity of the savings rate.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 94/15.

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Length: 28
Date of creation: 01 Jan 1994
Date of revision:
Handle: RePEc:imf:imfwpa:94/15

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Related research

Keywords: Economic growth; Economic models; equation; growth rate; growth model; equations; neoclassical growth model; growth rates; general equilibrium model; nonlinearity; business cycle; independent variable; prediction; survey; business cycle theory; national income; predictions; horizontal axis;

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References

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  1. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Public Finance in Models of Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 645-61, October.
  2. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
  3. Barro, R.J. & Mankiw, N.G. & Sala-i-Martin, X., 1992. "Capital Mobility in Neoclassical Models of Growth," Papers 655, Yale - Economic Growth Center.
  4. Casey B. Mulligan & Xavier Sala-i-Martin, 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," NBER Working Papers 3986, National Bureau of Economic Research, Inc.
  5. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S126-50, October.
  6. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  7. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-31, September.
  8. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
  9. Maurice Obstfeld, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," NBER Working Papers 0599, National Bureau of Economic Research, Inc.
  10. repec:fth:harver:1504 is not listed on IDEAS
  11. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
  12. Obstfeld, Maurice, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, MIT Press, vol. 97(2), pages 251-70, May.
  13. Shi, Shouyong & Epstein, Larry G, 1993. "Habits and Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 61-84, February.
  14. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  15. Rebelo, Sergio, 1991. "Growth in open economies," Policy Research Working Paper Series 799, The World Bank.
  16. Maurice Obstfeld, 1991. "Intertemporal Dependence, Impatience, and Dynamics," NBER Working Papers 3028, National Bureau of Economic Research, Inc.
  17. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  18. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  19. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  20. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  21. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  22. Epstein, Larry G & Hynes, J Allan, 1983. "The Rate of Time Preference and Dynamic Economic Analysis," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 611-35, August.
  23. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  24. Bin Xu, 1994. "Tax Policy Implications in Endogenous Growth Models," IMF Working Papers 94/38, International Monetary Fund.
  25. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, vol. 41(1), pages 68-95, February.
  26. Romer, P.M., 1988. "Capital Accumulation In The Theory Of Long Run Growth," RCER Working Papers 123, University of Rochester - Center for Economic Research (RCER).
  27. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
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Citations

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Cited by:
  1. Dai, Meixing, 2003. "Endogenous Wealth-Depending Time Preference and Fiscal Policy in Open Economy," MPRA Paper 13865, University Library of Munich, Germany.
  2. Nouriel Roubini & Gian-Maria Milesi-Ferretti, 1994. "Taxation and Endogenous Growth in Open Economies," IMF Working Papers 94/77, International Monetary Fund.
  3. Thomas M. Steger, 1997. "Productive Consumption and Growth in Developing Countries," Development and Comp Systems 9710001, EconWPA, revised 02 Dec 1997.
  4. repec:ebl:ecbull:v:8:y:2007:i:7:p:1-7 is not listed on IDEAS
  5. Cui, Xiaoyong & Gong, Liutang & Yang, Jianfang & Zou, Heng-fu, 2008. "Marshallian time preferences and monetary non-neutrality," Economic Modelling, Elsevier, vol. 25(6), pages 1196-1205, November.

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