Endogenous Time Preference and Endogenous Growth

Journal Issue

Volume/Issue:: 1994/15
Series:: IMF Working Papers
Author(s):: Howell Zee
Publisher:: INTERNATIONAL MONETARY FUND
Published Date:: January 1994
DOI:: http://dx.doi.org/10.5089/9781451843194.001
ISBN:: 9781451843194
ISSN:: 1018-5941
Page:: 28

The present paper develops a one-sector aggregate endogenous growth model with intertemporal preference dependence. The resultant model possesses the fundamental property of growth convergence, in the sense that countries with identical parameters regarding technology, preference, and government policy will converge to a steady state with the same (positive) growth rate. A notable tax policy implication of the model is that, even in the absence of externalities, the growth effects of an income tax are shown to be a priori ambiguous and dependent on the relative magnitudes of the tax rate and the tax elasticity of the savings rate.

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Endogenous Time Preference and Endogenous Growth