A simple dynastic economy with parental time investment in children's patience

Tetsugen Haruyama, Hyun Park

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

This article explores the dynamics of a general equilibrium when an individual's rate of time preferences is endogenous in a dynastic competitive economy. We postulate that altruistic parents allocate time to make their children patient to improve their lifetime welfare. The paper shows multiplicity and instability of the competitive equilibrium. Local and global indeterminacy emerges due to complementarity between a balanced growth rate and parental time allocation. Indeterminacy implies income and growth disparity among generations. In contrast, a balanced growth path is unique and determinate in the corresponding social optimum. A unique social optimum introduces a potential policy instrument for stabilizing a cyclical competitive equilibrium.

Original languageEnglish
Pages (from-to)235-247
Number of pages13
JournalEconomic Modelling
Volume61
DOIs
Publication statusPublished - 1 Feb 2017

Keywords

  • Bifurcations
  • Dynastic economy
  • Endogenous time preferences
  • Indeterminacy
  • Instability

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