The Neoclassical Growth Model with Heterogeneous Quasi-Geometric Consumers

Lilia Maliar and Serguei Maliar

Journal of Money, Credit and Banking, 2006, vol. 38, issue 3, 635-654

Abstract: This paper investigates how the assumption of quasi-geometric (hyperbolic) discounting affects the distributional implications of the standard one-sector neoclassical growth model with infinitely lived heterogeneous agents. The agents are subject to idiosyncratic shocks and face borrowing constraints. We confine attention to an interior Markov recursive equilibrium. The consequence of quasi-geometric discounting is that the effective discount factor of an agent is not a constant, but an endogenous variable which depends on the agent's current state. We show, both analytically and by simulation, that this new feature can significantly affect the distributional implications of the neoclassical growth model.

Date: 2006
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Working Paper: THE NEOCLASSICAL GROWTH MODEL WITH HETEROGENOUS QUASI-GEOMETRIC CONSUMERS (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:38:y:2006:i:3:p:635-654

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