Thomas Piketty and the Rate of Time Preference

Thomas Fischer

No 2017:1, Working Papers from Lund University, Department of Economics

Abstract: Using a standard model where the individual consumption path is computed solving an optimal control problem, we investigate central claims of Piketty (2014) Rather than r>g (confirmed in the data) r-s>g - with s being the rate of time preference - matters. If this condition holds and the elasticity of substitution in the production function is larger than one, the capital share converges to one in the long run. Nevertheless, this does not have major impact on the distribution of wealth. The latter, however, converges to maximum inequality for heterogeneous time preferences or rates of interest (either persistent or stochastic).

Keywords: wealth inequality; optimal control path; dynamic efficiency (search for similar items in EconPapers)
JEL-codes: C63 D31 E21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017-01-13
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: View citations in EconPapers (9)

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Journal Article: Thomas Piketty and the rate of time preference (2017)
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