Socially determined time preference in discrete time

Gomes, Orlando (2007): Socially determined time preference in discrete time. Unpublished.

Abstract

The aim of the paper is to develop a discrete time version of a one-sector optimal growth model with endogenous time preference. The intertemporal discount rate is determined by social factors (i.e., factors that are external to the individual agent), namely the economy wide levels of consumption and income. In continuous time, the combined effect of the previous factors is known to eventually produce local indeterminacy, instead of the well known saddle-path equilibrium of the standard Ramsey model. In discrete time, the possibility of local indeterminacy is explored under several types of Ramsey models with endogenous time preference: neo-classical and endogenous growth models, and models with production externalities and endogenous labor supply. Besides finding various possibilities regarding local dynamics, we also find that one of the models can give place to endogenous fluctuations, although this occurs only under rather exceptional circumstances.

• Item Type: MPRA Paper
• Institution: Escola Superior de Comunicação Social - Instituto Politécnico de Lisboa
• Language: English
• Keywords: Endogenous time preference; Growth models; Stability analysis; Technological externalities; Endogenous labor supply
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C61 - Optimization Techniques; Programming Models; Dynamic Analysis; O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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