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Endogenous time preference, investment externalities, and equilibrium indeterminacy

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  • Kawagishi, Taketo

Abstract

This paper analyzes a neoclassical growth model with endogenous time preference. Following Becker and Mulligan (1997), we assume that the household’s subjective discount rate decreases with its investment for patience. Furthermore, we extend the baseline setting by positing that the subjective discount rate depends on the average level of investment for patience in the economy (investment externalities) as well. Under these assumptions and the specification of each function, we show that equilibrium indeterminacy does not arise if investment externalities do not exist, while it can be observed in the presence of investment externalities.

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  • Kawagishi, Taketo, 2012. "Endogenous time preference, investment externalities, and equilibrium indeterminacy," Mathematical Social Sciences, Elsevier, vol. 64(3), pages 234-241.
    • Handle: RePEc:eee:matsoc:v:64:y:2012:i:3:p:234-241
    DOI: 10.1016/j.mathsocsci.2012.02.005
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    Cited by:

    1. Taketo Kawagishi & Kazuo Mino, 2016. "Time Preference and Income Convergence in a Dynamic Heckscher–Ohlin Model," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 592-603, August.
    2. Kawagishi, Taketo, 2014. "Investment for patience in an endogenous growth model," Economic Modelling, Elsevier, vol. 42(C), pages 508-515.
    3. Mao, Hui & Zhou, Li & Ying, RuiYao & Pan, Dan, 2021. "Time Preferences and green agricultural technology adoption: Field evidence from rice farmers in China," Land Use Policy, Elsevier, vol. 109(C).
    4. Liutang Gong & Wei Wang, 2020. "Self‐fulfilling patience," Australian Economic Papers, Wiley Blackwell, vol. 59(4), pages 336-357, December.

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