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Endogenous Time Preference and Endogenous Growth

  • Howell Zee

This paper develops a one-sector aggregate endogenous growth model with intertemporal preference dependence. The resultant model possesses the fundamental property of growth convergence, in the sense that countries with identical parameters regarding technology, preference, and government policy will converge to a steady state with the same (positive) growth rate. A notable tax policy implication of the model is that, even in the absence of externalities, the growth effects of an income tax are shown to be a priori ambiguous and dependent on the relative magnitudes of the tax rate and the tax elasticity of the savings rate.

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Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 11 (1997)
Issue (Month): 2 ()
Pages: 1-20

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Handle: RePEc:taf:intecj:v:11:y:1997:i:2:p:1-20
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  1. Robert J. Barro & N. Gregory Mankiw & Xavier Sala-i-Martin, 1994. "Capital mobility in Neoclassical models of growth," Economics Working Papers 82, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  3. Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Public Finance in Models of Economic Growth," CEPR Discussion Papers 630, C.E.P.R. Discussion Papers.
  4. Rebelo, Sergio, 1991. "Growth in open economies," Policy Research Working Paper Series 799, The World Bank.
  5. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  6. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  7. Obstfeld, Maurice, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, MIT Press, vol. 97(2), pages 251-70, May.
  8. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  9. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
  10. Robert G. King & Sergio T. Rebelo, 1989. "Transitional Dynamics and Economic Growth in the Neoclassical Model," NBER Working Papers 3185, National Bureau of Economic Research, Inc.
  11. Epstein, Larry G & Hynes, J Allan, 1983. "The Rate of Time Preference and Dynamic Economic Analysis," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 611-35, August.
  12. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  13. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  14. Maurice Obstfeld, 1980. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," NBER Working Papers 0599, National Bureau of Economic Research, Inc.
  15. Casey B. Mulligan & Xavier Sala-i-Martin, 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," NBER Working Papers 3986, National Bureau of Economic Research, Inc.
  16. Robert G. King & Sergio Rebelo, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," NBER Working Papers 3338, National Bureau of Economic Research, Inc.
  17. Romer, P.M., 1988. "Capital Accumulation In The Theory Of Long Run Growth," RCER Working Papers 123, University of Rochester - Center for Economic Research (RCER).
  18. repec:fth:harver:1504 is not listed on IDEAS
  19. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  20. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
  21. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  22. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, vol. 41(1), pages 68-95, February.
  23. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  24. Shi, Shouyong & Epstein, Larry G, 1993. "Habits and Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 61-84, February.
  25. Maurice Obstfeld, 1989. "Intertemporal Dependence, Impatience, and Dynamics," NBER Working Papers 3028, National Bureau of Economic Research, Inc.
  26. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
  27. Bin Xu, 1994. "Tax Policy Implications in Endogenous Growth Models," IMF Working Papers 94/38, International Monetary Fund.
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