Existence, Optimality and Dynamics of Equilibria with Endogenous Time Preference

Cuong Le Van (), Çağrı Sağlam and Selman Erol
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Cuong Le Van: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, University of Exeter Business School - University of Exeter, VCREME - Van Xuan Center of Research in Economics, Management and Environment, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Selman Erol: Bilkent University [Ankara]

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Abstract: To account for the development patterns that differ considerably among economies in the long run, a variety of one-sector models that incorporate some degree of market imperfections based on technological external effects and increasing returns have been presented. This paper studies the dynamic implications of, yet another mechanism, the endogenous rate of time preference depending on the stock of capital, in a one-sector growth model. The planner's problem is presented and the optimal paths are characterized. We show that development or poverty traps can arise even under a strictly convex technology. We also show that even under a convex-concave technology, the optimal path can exhibit global convergence to a unique stationary point. The multipliers system associated with an optimal path is proven to be the supporting price system of a competitive equilibrium under externality and detailed results concerning the properties of optimal (equilibrium) paths are provided. We show that the model exhibits globally monotone capital sequences yielding a richer set of potential dynamics than the classic model with exogenous discounting.

Keywords: Endogenous time preference; Optimal growth; Competitive equilibrium; Multiple steady-states (search for similar items in EconPapers)
Date: 2011-03
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00639731v1
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Citations: View citations in EconPapers (10)

Published in Journal of Mathematical Economics, 2011, 47 (2), pp.170-179

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Related works:
Journal Article: Existence, optimality and dynamics of equilibria with endogenous time preference (2011)
Working Paper: Existence, Optimality and Dynamics of Equilibria with Endogenous Time Preference (2011)
Working Paper: Existence, Optimality and Dynamics of Equilibria with Endogenous Time Preference (2011)
Working Paper: Existence, Optimality and Dynamics of Equilibria with Endogenous Time Preference (2011)
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