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Endogenous growth driven by government spending under quasi-hyperbolic discounting

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  • Kang, Minwook

Abstract

This paper examines the impact of government spending on economic growth within a quasi-hyperbolic discounting framework, integrating Barro’s (1990) and Laibson’s (1997) models. It highlights the negative effects of present bias on optimal government spending and endogenous growth rates.

Suggested Citation

  • Kang, Minwook, 2025. "Endogenous growth driven by government spending under quasi-hyperbolic discounting," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000114
    DOI: 10.1016/j.econlet.2025.112174
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    References listed on IDEAS

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    1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    2. Per Krusell & Burhanettin Kuruşçu & Anthony A. Smith Jr., 2010. "Temptation and Taxation," Econometrica, Econometric Society, vol. 78(6), pages 2063-2084, November.
    3. David Laibson & Andrea Repetto & Jeremy Tobacman, 2005. "Estimating Discount Functions with Consumption Choices over the Lifecycle," Levine's Bibliography 784828000000000643, UCLA Department of Economics.
    4. 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 103-126, October.
    5. Caliendo, Frank N. & Findley, T. Scott, 2014. "Discount functions and self-control problems," Economics Letters, Elsevier, vol. 122(3), pages 416-419.
    6. Kang, Minwook & Kim, Eungsik, 2023. "A government policy with time-inconsistent consumers," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 44-67.
    7. George-Marios Angeletos & David Laibson & Andrea Repetto & Jeremy Tobacman & Stephen Weinberg, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
    8. Strulik, Holger, 2015. "Hyperbolic discounting and endogenous growth," Economics Letters, Elsevier, vol. 126(C), pages 131-134.
    9. Nicola Pavoni & Hakki Yazici, 2017. "Optimal Life‐cycle Capital Taxation under Self‐control Problems," Economic Journal, Royal Economic Society, vol. 127(602), pages 1188-1216, June.
    10. Kang, Minwook & Kim, Eungsik, 2024. "Present bias and endogenous growth," Economics Letters, Elsevier, vol. 236(C).
    11. Kang, Minwook, 2021. "Aggregate savings under quasi-hyperbolic versus exponential discounting," Economics Letters, Elsevier, vol. 207(C).
    12. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    13. Kang, Minwook & Ye, Lei Sandy, 2023. "Dividend and corporate income taxation with present-biased consumers," Journal of Banking & Finance, Elsevier, vol. 152(C).
    14. Nicola Pavoni & Hakki Yazici, 2017. "Optimal Life‐cycle Capital Taxation under Self‐control Problems," Economic Journal, Royal Economic Society, vol. 127(602), pages 1188-1216, June.
    15. Cabo, Francisco & Martín-Herrán, Guiomar & Martínez-García, María Pilar, 2015. "Non-constant discounting and Ak-type growth models," Economics Letters, Elsevier, vol. 131(C), pages 54-58.
    16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Economic growth; Government expenditure; Hyperbolic discounting; Capital subsidy; Present bias;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E70 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - General

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