Arbeitspapier
Saving Rate Dynamics in the Neoclassical Growth Model: Hyperbolic Discounting and Observational Equivalence
The standard neoclassical growth model with Cobb-Douglas production predicts a monotonically declining saving rate, when reasonably calibrated. Ample empirical evidence, however, shows that the transition path of a countrys saving rate exhibits a rising or non-monotonic pattern. In important cases, hyperbolic discounting, which is empirically strongly supported, implies transitional dynamics of the saving rate that accords well with empirical evidence. This holds true even in a growth model with Cobb-Douglas production technology. We also identify the cases where hyperbolic discounting is observationally equivalent to exponential discounting. In those cases, hyperbolic discounting does not affect the saving rate dynamics. Numerical simulations employing a generalized class of hyperbolic discounting functions that we term regular discounting functions support the results.
- Language
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Englisch
- Bibliographic citation
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Series: Nota di Lavoro ; No. 42.2013
- Classification
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Wirtschaft
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Macroeconomics: Consumption; Saving; Wealth
Economic Growth and Aggregate Productivity: General
- Subject
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Saving Rate
Non-Monotonic Transition Path
Hyperbolic Discounting
Regular Discounting
Commitment
Short Planning Horizon
Neoclassical Growth Model
- Event
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Geistige Schöpfung
- (who)
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Farzin, Y. Hossein
Wendner, Ronald
- Event
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Veröffentlichung
- (who)
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Fondazione Eni Enrico Mattei (FEEM)
- (where)
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Milano
- (when)
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2013
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Farzin, Y. Hossein
- Wendner, Ronald
- Fondazione Eni Enrico Mattei (FEEM)
Time of origin
- 2013