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Decreasing marginal impatience destabilizes multi-country economies

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  • Hirose, K.
  • Ikeda, Shinsuke

Abstract

Despite the empirical evidence that consumers' degree of impatience decreases with wealth, the implication of decreasing marginal impatience (DMI) for general equilibrium dynamics has been insufficiently analyzed. By deriving the stability condition of multi-country equilibrium, we show that DMI is hardly compatible with stability. If there are two or more DMI countries, wealth distribution is necessarily unstable and hence inequality is inevitably divergent. In the presence of a DMI country, the number of interdependent countries should be small enough for stability. To integrate capital markets, participant countries must thus arrange jointly certain stabilizing international schemes.

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  • Hirose, K. & Ikeda, Shinsuke, 2015. "Decreasing marginal impatience destabilizes multi-country economies," Economic Modelling, Elsevier, vol. 50(C), pages 237-244.
    • Handle: RePEc:eee:ecmode:v:50:y:2015:i:c:p:237-244
    DOI: 10.1016/j.econmod.2015.06.023
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