Economic Growth in a Two-Agent Economy

Fernando Tohmé and Carlos Dabús

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: This paper presents a two-agent economy, in which each agent has a consumption-dependent time preference. The optimal dynamic paths of accumulation will tend to one of many possible steady states, depending on the location of the initial capital level. One of the main results of this model arises in comparison with single-agent models. More precisely, one possible instance of the model consists of a case in which the two agents are such that without interaction one would become “rich” and the other “poor”. However, since they share a single production unit, a potential poverty trap may become averted.

Pages: 26 pages
Date: 2009-06
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