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Non-constant discounting and Ak-type growth models

Francisco Cabo, Guiomar Martin-Herran and María Pilar Martínez-García ()

Economics Letters, 2015, vol. 131, issue C, 54-58

Abstract: This paper analyzes an Ak-type endogenous growth model under non-constant discounting, assuming both naïve and sophisticated consumers. For both types of consumers an isoelastic utility with an intertemporal elasticity below one guarantees observational equivalence under exponential and non-constant discounting, but rejects strong equivalence (identical overall impatience does not lead to identical growth rates). Further, polices aimed at increasing productivity of the economy are less growth-enhancing than typically predicted by the literature with exponential discounting.

Keywords: Non-constant discounting; Endogenous growth; Time-consistent and time-inconsistent solutions (search for similar items in EconPapers)
JEL-codes: D91 O40 C61 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.econlet.2015.03.040

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