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Poverty traps and growth in a model of endogenous time preference

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  • Chakrabarty, Debajyoti

Abstract

We study the effect of endogenous time preference in a simple neo-classical model of growth. The variation of time preference causes the economy to have multiple steady states, some of which are similar to poverty traps. The stability properties of these steady states are analyzed. The results are interpreted in light of the growth experiences of developing economies. The model can explain why two economies that have identical production technologies and identical preferences may converge to different levels of income depending on initial conditions.

Suggested Citation

  • Chakrabarty, Debajyoti, 2002. "Poverty traps and growth in a model of endogenous time preference," ZEI Working Papers B 27-2002, University of Bonn, ZEI - Center for European Integration Studies.
    • Handle: RePEc:zbw:zeiwps:b272002
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    Cited by:

    1. Kirill Borissov & Stefano Bosi & Thai Ha-Huy & Van-Quy Nguyen & Mikhail Pakhnin, 2025. "Endogenous Discounting and Economic Dynamics," CESifo Working Paper Series 12156, CESifo.
    2. Evangelos V. Dioikitopoulos & Sarantis Kalyvitis, 2015. "Optimal Fiscal Policy with Endogenous Time Preference," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 848-873, December.
    3. Agénor, Pierre-Richard, 2008. "Health and infrastructure in a model of endogenous growth," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1407-1422, December.
    4. Meysonnat, Aline & Muysken, Joan & Zon, Adriaan van, 2015. "Poverty traps: the neglected role of vitality," MERIT Working Papers 2015-052, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Chakrabarty, Debajyoti, 2002. "Growth and business cycles with imperfect credit markets," ZEI Working Papers B 29A-2002, University of Bonn, ZEI - Center for European Integration Studies.
    6. Debajyoti Chakrabarty, 2023. "Relative deprivation, time preference, and economic growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 489-525, September.
    7. Debajyoti Chakrabarty, 2022. "Taxation and human capital accumulation with endogenous mortality," The Japanese Economic Review, Springer, vol. 73(4), pages 555-596, October.
    8. Pierre-Richard Agénor, 2006. "A Theory of Infrastructure-led Development," Economics Discussion Paper Series 0640, Economics, The University of Manchester.
    9. Michel, Philippe & Vidal, Jean-Pierre, 2003. "Self-control and savings," Working Paper Series 211, European Central Bank.

    More about this item

    Keywords

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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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