On a two-sector endogenous growth model with quasi-geometric discounting

Ryoji Hiraguchi

Journal of Mathematical Economics, 2016, vol. 65, issue C, 26-35

Abstract: We study a two-sector endogenous growth model with quasi-geometric discounting in which human capital is the engine of growth. We show that a planning economy welfare-dominates a competitive economy and time-consistent government policy is welfare-improving if the agents are sufficiently patient. The government policy consists of a tax on physical capital income and a subsidy on human capital accumulation. Our results differ from those of existing one-sector models with quasi-geometric discounting in which a competitive economy always outperforms a planning economy and the government’s time-consistent tax policies reduce equilibrium welfare.

Keywords: Quasi-geometric discounting; Time consistency; Human capital (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:65:y:2016:i:c:p:26-35

DOI: 10.1016/j.jmateco.2016.05.004

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