Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212535 
Year of Publication: 
2004
Series/Report no.: 
BOFIT Discussion Papers No. 4/2004
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
We introduce endogenous time preference via investment in patience (farsightedness) in an overlapping generations growth model to study development traps.There is no investment in patience, if the economy is very poor, while if it is wealthy enough there is always such investment.We explore the conditions for the existence of the development trap, and study in detail a robust example of an economy with traps.It does not exist, if the economy's total factor productivity is large enough.Our results illustrate the complementarity between physical investment and investment in farsightedness.Our model may also explain why economic growth is affected by initial conditions.In addition we show that increased international capital mobility does not necessarily help economies to escape from development traps.
Subjects: 
development trap
overlapping generations
JEL: 
I30
O11
O16
Persistent Identifier of the first edition: 
ISBN: 
951-686-890-8
Document Type: 
Working Paper

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