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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. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  2. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  3. 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.
  4. Rebelo, Sergio, 1991. "Growth in open economies," Policy Research Working Paper Series 799, The World Bank.
  5. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-31, September.
  6. repec:fth:harver:1504 is not listed on IDEAS
  7. 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).
  8. 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.
  9. 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.
  10. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  11. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  12. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  13. Bin Xu, 1994. "Tax Policy Implications in Endogenous Growth Models," IMF Working Papers 94/38, International Monetary Fund.
  14. Robert G. King & Sergio Rebelo, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," NBER Working Papers 3338, National Bureau of Economic Research, Inc.
  15. 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.
  16. 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.
  17. Casey B. Mulligan & Xavier Sala-i-Martin, 1993. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 739-773.
  18. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 645-661.
  19. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
  20. Maurice Obstfeld, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 251-270.
  21. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  22. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers 629, Yale - Economic Growth Center.
  23. Maurice Obstfeld, 1980. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," NBER Working Papers 0599, National Bureau of Economic Research, Inc.
  24. 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.
  25. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, vol. 41(1), pages 68-95, February.
  26. Maurice Obstfeld, 1989. "Intertemporal Dependence, Impatience, and Dynamics," NBER Working Papers 3028, National Bureau of Economic Research, Inc.
  27. 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.
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