Working Papers, Department of Economics, Lund University
Thomas Piketty and the Rate of Time Preference
Abstract: Using a standard model where the individual consumption
path is computed solving an optimal control problem, we investigate central
claims of Piketty (2014) Rather than r>g (confirmed in the data) r-s>g -
with s being the rate of time preference - matters. If this condition holds
and the elasticity of substitution in the production function is larger
than one, the capital share converges to one in the long run. Nevertheless,
this does not have major impact on the distribution of wealth. The latter,
however, converges to maximum inequality for heterogeneous time preferences
or rates of interest (either persistent or stochastic).
Keywords: wealth inequality; optimal control path; dynamic efficiency; (follow links to similar papers)
JEL-Codes: C63; D31; E21; (follow links to similar papers)
34 pages, January 13, 2017
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