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Myopia and Inconsistency in the Neoclassical Growth Model

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  • Robert J. Barro

Abstract

The neoclassical growth model is modified to allow for a non-constant rate of time" preference. If the household cannot commit future choices of consumption and if utility is" logarithmic, then an equilibrium is found that resembles the standard results of the neoclassical" model. In this solution, the effective rate of time preference is high model has potentially important implications for institutional design and other policies because" households would benefit from an ability to commit future consumption there is a sense in" which the results are observationally equivalent to those of the conventional model. When the" framework is extended to allow for partial commitment ability, some testable hypotheses emerge" concerning the link between this ability and the rates of saving and growth. Steady-state results" are obtained for general concave utility functions, and some properties of the dynamic paths are" worked out for the case of isoelastic utility.

Suggested Citation

  • Robert J. Barro, 1997. "Myopia and Inconsistency in the Neoclassical Growth Model," NBER Working Papers 6317, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6317
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    Cited by:

    1. Maria Lorek, 2013. "Des pôles de croissance vers des systèmes d’innovation territorialisés dans une « nouvelle » économie de marche : le cas de Gdansk, Pologne [The poles of growth and conversion of industrial territo," Working Papers 274, Laboratoire de Recherche sur l'Industrie et l'Innovation. ULCO / Research Unit on Industry and Innovation.
    2. David Laibson & Andrea Repetto & Jeremy Tobacman, 2000. "A Debt Puzzle," NBER Working Papers 7879, National Bureau of Economic Research, Inc.
    3. Andrea Repetto, 2001. "Incentivos al ahorro personal: Lecciones de la economía del comportamiento," Central Banking, Analysis, and Economic Policies Book Series, in: Felipe Morandé & Rodrigo Vergara & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edit (ed.),Análisis Empírico del Ahorro en Chile, edition 1, volume 1, chapter 7, pages 191-240, Central Bank of Chile.
    4. Maria Lorek, 2015. "Crisis and conversion of industrial port complex: the case of Gdansk (Poland)," ERSA conference papers ersa15p847, European Regional Science Association.
    5. José Luis Hernández Mota, 2015. "El papel del desarrollo financiero como fuente del crecimiento económico," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 7(2), pages 235-256, July.
    6. Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1257-1268, December.
    7. Maria M. Ducla-Soares & Clara Costa-Duarte & Maria A. Cunha-e-Sa, 2001. "The hyperbolic forest owner," Nova SBE Working Paper Series wp405, Universidade Nova de Lisboa, Nova School of Business and Economics.

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    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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