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Optimal growth and impatience: A phase diagram analysis

Fwu-Ranq Chang

International Journal of Economic Theory, 2009, vol. 5, issue 2, 245-255

Abstract: When the time preference exhibits decreasing marginal impatience, the rate at which the discount function decreases plays a central role in the stability analysis. This paper shows that if the discount function is strictly decreasing, strictly convex and has a uniform bound on its first derivative, then the continuous‐time, one‐sector optimal growth problem has a unique steady state that exhibits the saddle‐point property. Moreover, the phase diagram analysis is geometrically similar to the case of a constant discount rate. The proposed bounded slope assumption is inspired by and in direct contrast with Magill and Nishimura's “division of countries” example.

Date: 2009
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Citations: View citations in EconPapers (17)

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https://doi.org/10.1111/j.1742-7363.2009.00107.x

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Working Paper: Optimal Growth and Impatience: A Phase Diagram Analysis (2004) Downloads
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International Journal of Economic Theory is currently edited by Kazuo Nishimura and Makoto Yano

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