Selection, Patience, and the Interest Rate (updated 2023 2023_01)

Radoslaw (Radek) Stefanski and Alex Trew

Working Papers from Business School - Economics, University of Glasgow

Abstract: The interest rate has been falling for centuries. The key to explaining this decline is increasing societal patience, driven by a process of natural selection. Three observations support this mechanism: patience varies across individuals, is inter-generationally persistent, and is positively related to fertility. To establish the importance of this channel, we introduce a dynamic, heterogeneous-agent model of fertility. The structure of our model enables us to use modern, micro level data to calibrate the historical distribution of patience. Our quantitative results match the centuries-long fall in the interest rate, highlighting the crucial role of selection in this historical, and ongoing, trend.

Keywords: Interest rates; selection; fertility; patience; heterogeneous agents (search for similar items in EconPapers)
JEL-codes: E21 E43 J11 N30 O11 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-his and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.gla.ac.uk/media/Media_1081264_smxx.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2020_03

Access Statistics for this paper

More papers in Working Papers from Business School - Economics, University of Glasgow Contact information at EDIRC.
Bibliographic data for series maintained by Business School Research Team ().