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Saving behavior in stationary equilibrium with random discounting

Author

Listed:
  • Edi Karni

    (Department of Economics, Johns Hopkins University, Baltimore, MD 21218, USA)

  • Itzhak Zilcha

    (The Berglas School of Economics, Tel Aviv University, Tel Aviv, ISRAEL)

Abstract

We study the implications of random discount rates of future generations for saving behavior and capital holdings in a steady state competitive equilibrium with heterogeneous population. A well-known difficulty in deterministic economies with heterogeneous households is that in steady state only the most patient households hold capital. In this paper we state conditions under which this random discounting is sufficient for households other than the most patient ones to save. We thus provide a simple and natural way of overcoming the aforementioned difficulty.

Suggested Citation

  • Edi Karni & Itzhak Zilcha, 2000. "Saving behavior in stationary equilibrium with random discounting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 551-564.
    • Handle: RePEc:spr:joecth:v:15:y:2000:i:3:p:551-564
    Note: Received: December 28, 1998; revised version: May 19, 1999
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    Cited by:

    1. Youichiro Higashi & Kazuya Hyogo & Norio Takeoka & Hiroyuki Tanaka, 2017. "Comparative impatience under random discounting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(3), pages 621-651, March.
    2. Higashi, Youichiro & Hyogo, Kazuya & Takeoka, Norio, 2009. "Subjective random discounting and intertemporal choice," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1015-1053, May.
    3. Daniele Pennesi, 2017. "Uncertain discount and hyperbolic preferences," Theory and Decision, Springer, vol. 83(3), pages 315-336, October.
    4. John Stachurski & Junnan Zhang, 2019. "Dynamic Programming with State-Dependent Discounting," Papers 1908.08800, arXiv.org, revised Oct 2020.

    More about this item

    Keywords

    Dynamic equilibrium with heterogeneous households; Random discounting; Saving.;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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