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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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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. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  2. Rebelo, Sergio, 1992. "Growth in open economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 36(1), pages 5-46, July.
  3. Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Public Finance in Models of Economic Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 630, C.E.P.R. Discussion Papers.
  4. Epstein, Larry G & Hynes, J Allan, 1983. "The Rate of Time Preference and Dynamic Economic Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(4), pages 611-35, August.
  5. King, R.G. & Rebelo, S.T., 1989. "Transitional Dynamics And Economic Growth In The Neoclassical Model," RCER Working Papers 206, University of Rochester - Center for Economic Research (RCER).
  6. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 407-43, May.
  7. repec:fth:harver:1504 is not listed on IDEAS
  8. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  9. Robert J. Barro & N. Gregory Mankiw & Xavier Sala-i-Martin, 1992. "Capital Mobility in Neoclassical Models of Growth," NBER Working Papers 4206, National Bureau of Economic Research, Inc.
  10. Mulligan, C.B. & Sala-i-Martin, X., 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," Papers, Yale - Economic Growth Center 651, Yale - Economic Growth Center.
  11. 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, University of Chicago Press, vol. 101(3), pages 485-517, June.
  12. Obstfeld, Maurice, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(2), pages 251-70, May.
  13. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 500-521, June.
  14. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(3), pages 519-50, June.
  15. Obstfeld, Maurice, 1990. "Intertemporal dependence, impatience, and dynamics," Journal of Monetary Economics, Elsevier, Elsevier, vol. 26(1), pages 45-75, August.
  16. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, American Economic Association, vol. 76(5), pages 1072-85, December.
  17. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers, Yale - Economic Growth Center 629, Yale - Economic Growth Center.
  18. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  19. 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).
  20. Obstfeld, Maurice, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(6), pages 1142-61, December.
  21. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, Elsevier, vol. 41(1), pages 68-95, February.
  22. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 61-84, February.
  23. Bin Xu, 1994. "Tax Policy Implications in Endogenous Growth Models," IMF Working Papers 94/38, International Monetary Fund.
  24. Robert G. King & Sergio Rebelo, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," NBER Working Papers 3338, National Bureau of Economic Research, Inc.
  25. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, American Economic Association, vol. 77(2), pages 56-62, May.
  26. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
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Citations

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Cited by:
  1. Cui, Xiaoyong & Gong, Liutang & Yang, Jianfang & Zou, Heng-fu, 2008. "Marshallian time preferences and monetary non-neutrality," Economic Modelling, Elsevier, Elsevier, vol. 25(6), pages 1196-1205, November.
  2. Dai, Meixing, 2003. "Endogenous Wealth-Depending Time Preference and Fiscal Policy in Open Economy," MPRA Paper 13865, University Library of Munich, Germany.
  3. Thomas Steger, 1997. "Productive Consumption and Growth in Developing Countries," Volkswirtschaftliche Diskussionsbeiträge, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht 64-97, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  4. repec:ebl:ecbull:v:8:y:2007:i:7:p:1-7 is not listed on IDEAS
  5. Nouriel Roubini & Gian Maria Milesi-Ferrett, 1994. "Taxation and Endogenous Growth in Open Economies," NBER Working Papers 4881, National Bureau of Economic Research, Inc.

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