Existence, optimality and dynamics of equilibria with endogenous time preference

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dc.citation.epage179en_US
dc.citation.issueNumber2en_US
dc.citation.spage170en_US
dc.citation.volumeNumber47en_US
dc.contributor.authorErol, S.en_US
dc.contributor.authorVan, C. L.en_US
dc.contributor.authorSaglam, C.en_US
dc.date.accessioned2015-07-28T12:00:45Z
dc.date.available2015-07-28T12:00:45Z
dc.date.issued2011en_US
dc.departmentDepartment of Economicsen_US
dc.description.abstractThis paper studies the dynamic implications of the endogenous rate of time preference depending on the stock of capital, in a one-sector growth model. The planner's problem is presented and the optimal paths are characterized. We prove that there exists a critical value of initial stock, in the vicinity of which, small differences lead to permanent differences in the optimal path. Indeed, we show that a development trap can arise even under a strictly convex technology. In contrast with the early contributions that consider recursive preferences, the critical stock is not an unstable steady state so that if an economy starts at this stock, an indeterminacy will emerge. We also show that even under a convex-concave technology, the optimal path can exhibit global convergence to a unique stationary point. The multipliers system associated with an optimal path is proven to be the supporting price system of a competitive equilibrium under externality and detailed results concerning the properties of optimal (equilibrium) paths are provided. We show that the model exhibits globally monotone capital sequences yielding a richer set of potential dynamics than the classic model with exogenous discounting. (C) 2011 Elsevier B.V. All rights reserved.en_US
dc.identifier.doi10.1016/j.jmateco.2010.12.006en_US
dc.identifier.eissn1873-1538
dc.identifier.issn0304-4068
dc.identifier.urihttp://hdl.handle.net/11693/12254
dc.language.isoEnglishen_US
dc.publisherElsevier BVen_US
dc.relation.isversionofhttp://dx.doi.org/10.1016/j.jmateco.2010.12.006en_US
dc.source.titleJournal of Mathematical Economicsen_US
dc.subjectEndogenous time preferenceen_US
dc.subjectOptimal growthen_US
dc.subjectCompetitive equilibriumen_US
dc.subjectMultiple steady-statesen_US
dc.titleExistence, optimality and dynamics of equilibria with endogenous time preferenceen_US
dc.typeArticleen_US

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