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The Fisherian Time Preference and the Ebolution of Capital Ownership Patterns in a Global Economy

  • Kyoji Fukao
  • Koichi Hamada

Conventionally economic growth theory was based on the assumption of a constant rate of time preference. Uzawa (1968) and Obstfeld (~, 1981) introduced the rate of time preference that increases with the utility level. Irving Fisher (The Theory of Interest) has a different opinion, however, that people are more time impatient at the lower level of income. This paper assumes a non-monotonic time preference schedule such that people are more patient at the middle income levels and are less patient when they are either very poor or rich. Based on a nonlinear savings function out of wealth implied by such a time-preference schedule, this paper develops a single-good, multi-country growth model of a global economy with free capital mobility. The long-run property of this System is characterized by three kinds of long-run equilibrium: the starvation (fatal attractor) equilibrium, the imperialism equilibria dominated by a nation or by a group of nations, and the co-prosperity equilibrium where the wealth and the income of countries in the system grow proportionately. Bifurcation phenomena and the global stability of the system by the Lyapunov function will be discussed. Our system has a strong resemblance to some models of ecology where species compete for their survival (May, Stability and Complexity in Model Ecosystems). Here we can properly analyze the transition of a debtor to a creditor country from a global perspective, and make a case for the pump-priming foreign aid or debt relief policy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3104.

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Date of creation: Sep 1989
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Handle: RePEc:nbr:nberwo:3104
Note: ITI IFM
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  1. Bewley, Truman, 1982. "An integration of equilibrium theory and turnpike theory," Journal of Mathematical Economics, Elsevier, vol. 10(2-3), pages 233-267, September.
  2. Fukao, Kyoji, 2004. "Strategic Aspects of International Lending and Borrowing : A Two-Country Dynamic Game Model," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 45(1), pages 47-66, June.
  3. Ruffin, Roy J, 1979. "Growth and the Long-Run Theory of International Capital Movements," American Economic Review, American Economic Association, vol. 69(5), pages 832-42, December.
  4. Kawai, M. & Okumura, R., 1990. "Time Preference, International Capital Mobility And Optimum Asset Accumulation," ISER Discussion Paper 0231, Institute of Social and Economic Research, Osaka University.
  5. Iwai, Katsuhito, 1972. "Optimal economic growth and stationary ordinal utility --A fisherian approach," Journal of Economic Theory, Elsevier, vol. 5(1), pages 121-151, August.
  6. Peter A. Diamond & Tjalling C. Koopmans & Richard E. Williamson, 1962. "Stationary Utility and Time Preference," Cowles Foundation Discussion Papers 142, Cowles Foundation for Research in Economics, Yale University.
  7. A. P. Thirlwall, 1983. "Introduction," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 5(3), pages 341-344, April.
  8. Day, Richard H, 1982. "Irregular Growth Cycles," American Economic Review, American Economic Association, vol. 72(3), pages 406-14, June.
  9. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  10. 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.
  11. A. Meltzer & Peter Ordeshook & Thomas Romer, 1983. "Introduction," Public Choice, Springer, vol. 41(1), pages 1-5, January.
  12. Willem H. Buiter, 1979. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," NBER Working Papers 0352, National Bureau of Economic Research, Inc.
  13. Maurice Obstfeld, 1981. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," NBER Working Papers 0686, National Bureau of Economic Research, Inc.
  14. Ryder, Harl E., 1985. "Heterogeneous time preferences and the distribution of wealth," Mathematical Social Sciences, Elsevier, vol. 9(1), pages 63-76, February.
  15. Day, Richard H, 1983. "The Emergence of Chaos from Classical Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 201-13, May.
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