Decreasing Marginal Impatience and Capital Accumulation in a Two-country World Economy

Ken-Ichi Hirose and Shinsuke Ikeda

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: This research is the first to examine dynamic general equilibrium in a growing two-country economy under decreasing marginal impatience (DMI). The stability condition is shown to be more restrictive than in the case of an endowment economy and/or under increasing marginal impatience (IMI). By analyzing global-economy adjustment to time preference shocks, international transfers, and productivity shocks, equilibrium dynamics in the presence of DMI differ drastically from what is obtained when the standard IMI model is used. For example, in a country characterized by DMI, a positive productivity shock improves the country's welfare level and lowers its steady-state time preference and, hence, the steady-state interest rate. This leads to an increase in the neighboring country's capital stock.

Date: 2013-08
New Economics Papers: this item is included in nep-dge
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https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2013/DP0882.pdf

Related works:
Journal Article: Decreasing Marginal Impatience and Capital Accumulation in a Two-Country World Economy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0882

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