IMF Working Papers

Endogenous Time Preference and Endogenous Growth

Author/Editor:

Howell H Zee

Publication Date:

January 1, 1994

Summary:

The present paper develops a one-sector aggregate endogenous growth model with intertemporal preference dependence. The resultant model possesses the fundamental property of growth convergence, in the sense that countries with identical parameters regarding technology, preference, and government policy will converge to a steady state with the same (positive) growth rate. A notable tax policy implication of the model is that, even in the absence of externalities, the growth effects of an income tax are shown to be a priori ambiguous and dependent on the relative magnitudes of the tax rate and the tax elasticity of the savings rate.

Series:

Working Paper No. 1994/015

Subject:

Consumption Consumption taxes Human capital Income tax systems Labor National accounts Taxes