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Poverty traps and growth in a model of endogenous time preference

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  • Chakrabarty, Debajyoti

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 ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 27-2002.

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Date of creation: 2002
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Handle: RePEc:zbw:zeiwps:b272002

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Keywords: Intertemporal choice; Saving; Growth; Local stability; Poverty traps;

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  1. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(1), pages 54-77, February.
  2. 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.
  3. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 501-26, May.
  4. Epstein, Larry G., 1983. "Stationary cardinal utility and optimal growth under uncertainty," Journal of Economic Theory, Elsevier, Elsevier, vol. 31(1), pages 133-152, October.
  5. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  6. Maurice Obstfeld, 1989. "Intertemporal Dependence, Impatience, and Dynamics," NBER Working Papers 3028, National Bureau of Economic Research, Inc.
  7. Rolf Mantel, 1998. "Optimal Economic growth with recursive preferences: decreasing rate of time preference," Estudios de Economia, University of Chile, Department of Economics, University of Chile, Department of Economics, vol. 25(2 Year 19), pages 161-178, December.
  8. Iwai, Katsuhito, 1972. "Optimal economic growth and stationary ordinal utility --A fisherian approach," Journal of Economic Theory, Elsevier, Elsevier, vol. 5(1), pages 121-151, August.
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Cited by:
  1. Satya P. Das & Rajat Deb, 2003. "Policies to combat child labor: A dynamic analysis," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers, Indian Statistical Institute, New Delhi, India 04-01, Indian Statistical Institute, New Delhi, India.
  2. Pierre-Richard Agénor, 2005. "Health and Infrastructure in Models of Endogenous Growth," The School of Economics Discussion Paper Series, Economics, The University of Manchester 0539, Economics, The University of Manchester.
  3. Chakrabarty, Debajyoti, 2002. "Growth and business cycles with imperfect credit markets," ZEI Working Papers B 29A-2002, ZEI - Center for European Integration Studies, University of Bonn.
  4. Michel, Philippe & Vidal, Jean-Pierre, 2003. "Self-control and savings," Working Paper Series, European Central Bank 0211, European Central Bank.

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