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Poverty traps and Growth in a model of Endogenous Time Preference

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  • Debajyoti Chakrabarty

    (Rutgers University)

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

  • Debajyoti Chakrabarty, 2000. "Poverty traps and Growth in a model of Endogenous Time Preference," Departmental Working Papers 200018, Rutgers University, Department of Economics.
    • Handle: RePEc:rut:rutres:200018
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    References listed on IDEAS

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    4. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 729-758.
    5. Masao Ogaki & Andrew Atkeson, 1997. "Rate Of Time Preference, Intertemporal Elasticity Of Substitution, And Level Of Wealth," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 564-572, November.
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    7. Rolf Mantel, 1998. "Optimal Economic growth with recursive preferences: decreasing rate of time preference," Estudios de Economia, University of Chile, Department of Economics, vol. 25(2 Year 19), pages 161-178, December.
    8. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 501-526.
    9. Obstfeld, Maurice, 1990. "Intertemporal dependence, impatience, and dynamics," Journal of Monetary Economics, Elsevier, vol. 26(1), pages 45-75, August.
    10. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
    11. Epstein, Larry G., 1983. "Stationary cardinal utility and optimal growth under uncertainty," Journal of Economic Theory, Elsevier, vol. 31(1), pages 133-152, October.
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    Cited by:

    1. 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.
    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. Debajyoti Chakrabarty, 2022. "Taxation and human capital accumulation with endogenous mortality," The Japanese Economic Review, Springer, vol. 73(4), pages 555-596, October.
    5. 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).
    6. 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.
    7. Pierre-Richard Agénor, 2006. "A Theory of Infrastructure-led Development," Economics Discussion Paper Series 0640, Economics, The University of Manchester.
    8. Michel, Philippe & Vidal, Jean-Pierre, 2003. "Self-control and savings," Working Paper Series 211, European Central Bank.

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    More about this item

    Keywords

    Intertemporal choice;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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