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Time preference and cyclical endogenous growth

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  • Gomes, Orlando

Abstract

The paper develops an AK endogenous growth model with an endogenously determined rate of intertemporal preference. Following some of the related literature, we assume that the degree of impatience that is revealed by the representative agent, regarding future consumption, depends on income. To be precise, the proposed framework establishes a link between the output gap and the discount rate attached to the sequence of future utility functions. We analyze both local and global dynamics. From a local analysis point of view, a variety of stability results is possible to obtain, depending on parameter values. The study of global dynamics allows to find endogenous business cycles under some reasonable circumstances. On a second stage, the model is extended to include the role of leisure.

Suggested Citation

  • Gomes, Orlando, 2007. "Time preference and cyclical endogenous growth," MPRA Paper 3282, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3282
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    References listed on IDEAS

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    15. repec:cup:macdyn:v:6:y:2002:i:5:p:633-64 is not listed on IDEAS
    16. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
    17. Palivos, Theodore & Wang, Ping & Zhang, Jianbo, 1997. "On the Existence of Balanced Growth Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 205-224, February.
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    Cited by:

    1. Mauro Sodini, 2011. "Local and Global Dynamics in an Overlapping Generations Model with Endogenous Time Discounting," Computational Economics, Springer;Society for Computational Economics, vol. 38(3), pages 277-293, October.

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    More about this item

    Keywords

    Time preference; Endogenous growth; Endogenous fluctuations; Quasiperiodic orbits;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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