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On discounting and voting in a simple growth model

Kirill Borissov (), Mikhail Pakhnin () and Clemens Puppe ()

European Economic Review, 2017, vol. 94, issue C, 185-204

Abstract: In dynamic resource allocation models, the non-existence of voting equilibria is a generic phenomenon due to the multi-dimensionality of the choice space even if agents are heterogeneous only in their discount factors. Nevertheless, at each point in time there may exist a “median voter” whose preferred instantaneous consumption rate is supported by a majority of agents. Based on this observation, we propose an institutional setup (“intertemporal majority voting”) in a Ramsey-type growth model with common consumption and heterogeneous agents, and show that it provides a microfoundation of the choice of the optimal consumption stream of the “median” agent. While the corresponding intertemporal consumption stream is in general not a Condorcet winner among all feasible paths, its induced instantaneous consumption rates receive a majority at each point in time in the proposed intertemporal majority voting procedure. We also provide a characterization of stationary voting equilibria in the case where agents may differ not only in their time preferences, but also in their felicity functions.

Keywords: Collective choice; Common-pool resource; Economic growth; Heterogeneous agents; Median voter theorem (search for similar items in EconPapers)
JEL-codes: D11 D71 D91 O13 O43 (search for similar items in EconPapers)
Date: 2017
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Journal Article: On discounting and voting in a simple growth model (2017) Downloads
Working Paper: On Discounting and Voting in a Simple Growth Model (2016) Downloads
Working Paper: On discounting and voting in a simple growth model (2015) Downloads
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DOI: 10.1016/j.euroecorev.2017.03.001

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