Capital Accumulation And Present-biased Preference

Peng Wang and Heng-Fu Zou (hzoucema@gmail.com)

No 531, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: This paper reexamines the capital accumulation within a neo-classical growth model under the assumption of hyperbolic discounting as well as endogenous preference, finding that 1) two kinds of Naifs¡¯ behavior coincides under log utility; 2) increasing marginal impatience due to capital accumulation itself will negatively affect the steady state locus of consumption and capital; 3) the effect of hyperbolic settings through effective rate of preference is still ambiguous; 4) we prove the saddle-point equilibrium property for the steady state under various assumptions about individual¡¯s preference. Our model also justifies Max Weber's idea that although spirit of capitalism is an engine to capital accumulation, the subsequent growing wealth will damage this engine.

Keywords: hyperbolic discounting; time-inconsistent; capital accumulation; spirit of capitalism (search for similar items in EconPapers)
JEL-codes: D90 E13 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2012
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:531

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