Poverty traps and growth in a model of endogenous time preference

Debajyoti Chakrabarty

We study the effect of endogenous time preference in a simple neo-classical model of growth. The variation of time preference causes the economy to have multiple steady states, some of which are similar to poverty traps. The stability properties of these steady states are analyzed. The results are interpreted in light of the growth experiences of developing economies. The model can explain why two economies that have identical production technologies and identical preferences may converge to different levels of income depending on initial conditions.

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Year of publication:	2002
Authors:	Chakrabarty, Debajyoti
Publisher:	Bonn : ZEI
Subject:	Intertemporal choice \| Saving \| Growth \| Local stability \| Poverty traps \| Intertemporale Entscheidung \| Wachstumstheorie \| Growth theory \| Armut \| Poverty \| Theorie \| Theory