IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Endogenous time preference, investment and development traps

  • Haaparanta, Pertti


    (Helsinki School of Economics)

  • Puhakka, Mikko


    (University of Oulu)

Registered author(s):

    We introduce endogenous time preference via investment in patience (farsightedness) in an overlapping generations growth model to study development traps. There is no investment in patience, if the economy is very poor, while if it is wealthy enough there is always such investment. We explore the conditions for the existence of the development trap, and study in detail a robust example of an economy with traps. It does not exist, if the economy's total factor productivity is large enough. Our results illustrate the complementarity between physical investment and investment in farsightedness. Our model may also explain why economic growth is affected by initial conditions. In addition we show that increased international capital mobility does not necessarily help economies to escape from development traps.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 4/2004.

    in new window

    Length: 30 pages
    Date of creation: 05 Mar 2004
    Date of revision:
    Handle: RePEc:hhs:bofitp:2004_004
    Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
    Phone: + 358 10 831 2268
    Fax: + 358 10 831 2294
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Charles I. Jones, . "Convergence Revisited," Working Papers 96006, Stanford University, Department of Economics.
    2. Paul Collier & Jan Willem Gunning, 1998. "Explaining African economic performance," Economics Series Working Papers WPS/1997-02.2, University of Oxford, Department of Economics.
    3. Graham, Bryan S & Temple, Jonathan, 2001. "Rich Nations, Poor Nations: How Much can Multiple Equilibria Explain?," CEPR Discussion Papers 3046, C.E.P.R. Discussion Papers.
    4. T. Paul Schultz, 2003. "Human Capital, Schooling and Health Returns," Working Papers 853, Economic Growth Center, Yale University.
    5. Angus Deaton, 2002. "Health, inequality, and economic development," Working Papers 209, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    6. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 729-758.
    7. Elsa V. Artadi & Xavier Sala-i-Martín, 2003. "The economic tragedy of the XXth Century: Growth in Africa," Economics Working Papers 684, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Michael Stern, 2006. "Endogenous time preference and optimal growth," Economic Theory, Springer, vol. 29(1), pages 49-70, September.
    9. Buffie, Edward F, 1985. "Price-Output Dynamics, Capital Inflows and Real Appreciation," Oxford Economic Papers, Oxford University Press, vol. 37(4), pages 529-51, December.
    10. Azariadis, Costas, 1996. " The Economics of Poverty Traps: Part One: Complete Markets," Journal of Economic Growth, Springer, vol. 1(4), pages 449-96, December.
    11. Galor, Oded & Ryder, Harl E., 1989. "Existence, uniqueness, and stability of equilibrium in an overlapping-generations model with productive capital," Journal of Economic Theory, Elsevier, vol. 49(2), pages 360-375, December.
    12. Gary S. Becker & Casey B. Mulligan, 1994. "On the Endogenous Determination of Time Preference," University of Chicago - George G. Stigler Center for Study of Economy and State 98, Chicago - Center for Study of Economy and State.
    13. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, June.
    14. Buffie,Edward F., 2001. "Trade Policy in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521782234.
    15. Buffie,Edward F., 2001. "Trade Policy in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521004268.
    16. Das, Mausumi, 2003. "Optimal growth with decreasing marginal impatience," Journal of Economic Dynamics and Control, Elsevier, vol. 27(10), pages 1881-1898, August.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:hhs:bofitp:2004_004. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Päivi Määttä)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.