- مبلغ: ۸۶,۰۰۰ تومان
- مبلغ: ۹۱,۰۰۰ تومان
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.
9. Concluding remarks
This paper examines an overlapping-generations economy when time discounting in preferences is shaped by parental time spent with children in the same family. The standard results, such as existence, uniqueness, stability, and many other properties, do not necessarily hold in the dynastic competitive economy in the presence of endogenous time preference formation. For the dynastic competitive economy with preference externalities over generations (i.e., an intergenerational correlation in altruistic preferences), we find that the long-run growth rate of a balanced growth path in the competitive economy is not monotonic in terms of the equilibrium time allocation with children. The non-monotonicity is due to the joint effect of the parental time allocation, namely, the welfare loss from reducing leisure and the altruistic award from patient children’s welfare gain. Multiple balanced growth paths arise when the time discount function increases fast enough in the parental time spent with children to shape their future orientation. Indeterminacy of the balanced growth path and thus the continuum of transitional dynamic paths results. Hence, the dynastic competitive economy is locally and globally indeterminate. This finding suggests a different income distribution within a generation and/or across generations in the dynastic competitive growing economy with endogenous children’s time preferences.