Investment for Patience in an Endogenous Growth Model
This paper explores a one-sector AK model in which time preference depends on private investment in future-oriented resources along the lines of Becker and Mulligan (1997). Assuming that time preference is also affected by the social level of such investment and that of consumption, we show that multiple balanced growth path (BGP henceforth) equilibria can exist, and provide the conditions for multiple BGP equilibria. Furthermore, we clarify that the equilibrium path is indeterminate in the high-growth BGP equilibrium, while it is determinate in the low-growth BGP equilibrium. We also discuss the effect of a subsidy policy to private investment in future-oriented resources on an endogenous growth rate.
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