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Poverty traps and Growth in a model of Endogenous Time Preference

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  • Debajyoti Chakrabarty

    ()
    (Rutgers University)

Abstract

We study the effect of endogenous time preference in a simple neo-classical model of growth. The variation of time preference causes the economy to have multiple steady states, some of which are similar to poverty traps. The stability properties of these steady states are analyzed. The results are interpreted in light of the growth experiences of developing economies. The model can explain why two economies that have identical production technologies and identical preferences may converge to different levels of income depending on initial conditions.

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Bibliographic Info

Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200018.

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Date of creation: 20 Oct 2000
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Handle: RePEc:rut:rutres:200018

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Keywords: Intertemporal choice;

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References

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  1. Maurice Obstfeld, 1989. "Intertemporal Dependence, Impatience, and Dynamics," NBER Working Papers 3028, National Bureau of Economic Research, Inc.
  2. Epstein, Larry G., 1983. "Stationary cardinal utility and optimal growth under uncertainty," Journal of Economic Theory, Elsevier, vol. 31(1), pages 133-152, October.
  3. Masao Ogaki & Andrew Atkeson, 1997. "Rate Of Time Preference, Intertemporal Elasticity Of Substitution, And Level Of Wealth," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 564-572, November.
  4. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  5. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  6. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  7. Rolf Mantel, 1998. "Optimal Economic growth with recursive preferences: decreasing rate of time preference," Estudios de Economia, University of Chile, Department of Economics, vol. 25(2 Year 19), pages 161-178, December.
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Cited by:
  1. Pierre-Richard Agénor, 2006. "A Theory of Infrastructure-led Development," The School of Economics Discussion Paper Series 0640, Economics, The University of Manchester.
  2. Satya P. Das & Rajat Deb, 2003. "Policies to combat child labor: A dynamic analysis," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 04-01, Indian Statistical Institute, New Delhi, India.
  3. P R Agénor, 2005. "Health and Infrastructure in Models of Endogenous Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 62, Economics, The Univeristy of Manchester.
  4. Agénor, Pierre-Richard, 2010. "A theory of infrastructure-led development," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 932-950, May.
  5. Chakrabarty, Debajyoti, 2003. "Growth and Business Cycles with Imperfect Credit Markets," Working Papers 7, University of Sydney, School of Economics.
  6. Michel, Philippe & Vidal, Jean-Pierre, 2003. "Self-control and savings," Working Paper Series 0211, European Central Bank.

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