A model with endogenously determined cycles, discounting and growth

Import Tariffs and Growth in a Model with Habits

“…Given that the rate of time preference is monotone in the felicity, the only way to guarantee a constant rate of time preference along a BGP is γ=1. Moreover, our form (7) is consistent with the recent paper on endogenous rates of time preference by Drugeon (1998) that shows that the homogeneity of degree zero with respect to an individual consumption and the living standard is a necessary condition for the existence of a BGP. Thus, although our function form is restrictive, it is necessary in order to assure a BGP.…”

“…In a recent paper Drugeon (1998) introduces endogenous discounting that is increasing in consumption and decreasing in the living standard in a society, measured by the average consumption in the society. Our formulation is consistent with Drugeon (1998) in that the discounting is decreasing in the average foreign living standards.…”

“…First, the Ricardian theorem of comparative advantage holds in the two-country world even if the preferences are different across countries. Second, in the case of incomplete specialization, local indeterminacy emerges under milder conditions, as compared to Drugeon (1998) and Nishimura and Shimomura (2006). Third, in the case of complete specialization, the relationship between tariffs and economic growth is ambiguous.…”

“…The external effect is reminiscent of the consumption externalities in a closed-economy, unbounded growth model by Drugeon (1998). By assuming an agent's rate of time preference that is decreasing in the consumption standard measured by average consumption, Drugeon (1998) finds the emergence of local indeterminacy.…”

“…By assuming an agent's rate of time preference that is decreasing in the consumption standard measured by average consumption, Drugeon (1998) finds the emergence of local indeterminacy. Like Drugeon (1998) the rate of time preference is decreasing in the consumption externalities in our model.…”