Patience and prosperity

Arbeitspapier

This paper introduces wealth-dependent time preference into a simple model of endogenous growth. The model generates adjustment dynamics in line with the historical facts on savings and economic growth in Europe from the High Middle Ages to today. Along a virtuous cycle of development more wealth leads to more patience, which leads to more savings and even higher wealth. Savings rates and income growth rates are thus jointly increasing during the process of development until they converge towards constants along a balanced growth path. During the transition to modern growth an economy in which the association of wealth and patience is stronger overtakes an otherwise identical economy and generates temporarily diverging growth rates. It is shown how wealth-dependent time preference can explain the existence of a locally stable poverty trap as well as the phenomenon of simultaneously falling interest rates and rising growth rates.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeitrag ; No. 426

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Analyses of Economic Development ; One, Two, and Multisector Growth Models ; Micro-Based Behavioral Economics: General‡ ; Other Economic Systems: Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
• Subject: economic growth ; savings ; time preference ; poverty trap ; moral consequences of economic growth ; Sparquote ; Wirtschaftswachstum ; Zeitpräferenz ; Vermögenseffekt ; Entwicklung ; Gleichgewichtiges Wachstum ; Theorie ; Europa

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Strulik, Holger
• Event: Veröffentlichung
• (who): Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät
• (where): Hannover
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/37105
• Last update: 20.09.2024, 8:23 AM CEST