Munich Personal RePEc Archive

Live and Let Live: Sustainable Heterogeneity Will Generally Prevail

Harashima, Taiji (2016): Live and Let Live: Sustainable Heterogeneity Will Generally Prevail.

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As is well known, the most patient household (i.e., the household possessing the lowest rate of time preference) will eventually own all capital in an economy if it behaves unilaterally without considering the optimality of the other households. This paper shows that choosing to engage in unilateral behavior is not always better for the most patient household than choosing multilateral behavior because unilateral behavior results in fewer educational opportunities for most people and constrains innovation in technologically advanced societies. Therefore, the rate of growth on the path when unilateral behavior is taken will be generally lower than that on the path when multilateral behavior is taken.

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