A simple dynastic economy with parental time investment in children’s patience

Tetsugen Haruyama and Hyun Park

Economic Modelling, 2017, vol. 61, issue C, 235-247

Abstract: This article explores the dynamics of a general equilibrium when an individual’s rate of time preferences is endogenous in a dynastic competitive economy. We postulate that altruistic parents allocate time to make their children patient to improve their lifetime welfare. The paper shows multiplicity and instability of the competitive equilibrium. Local and global indeterminacy emerges due to complementarity between a balanced growth rate and parental time allocation. Indeterminacy implies income and growth disparity among generations. In contrast, a balanced growth path is unique and determinate in the corresponding social optimum. A unique social optimum introduces a potential policy instrument for stabilizing a cyclical competitive equilibrium.

Keywords: Bifurcations; Dynastic economy; Endogenous time preferences; Indeterminacy; Instability (search for similar items in EconPapers)
JEL-codes: C62 D91 I31 O15 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:61:y:2017:i:c:p:235-247

DOI: 10.1016/j.econmod.2016.12.012

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