Endogenous Discount Rate and Elasticity of the Marginal Utility of Consumption

Di Vita, Giuseppe

Abstract

Endogenous Discount Rate and Elasticity of the Marginal Utility of Consumption

Giuseppe Di Vita

University of Catania - Faculty of Law

May 30, 2011

Applied Economics Letters, 2012, 19(7):665-669

Abstract:
Using an endogenous growth model where the discount rate is a function of consumption, we show that the condition in which the elasticity of the marginal utility of consumption is greater than one ensures, at the same time, the existence of an unique saddle point equilibrium and the maximization of capital and consumption.

Keywords: elasticity of the marginal utility of consumption, endogenous discount rate, growth model, saddle point equilibrium

JEL Classification: C62, D9, E13

Accepted Paper Series

Date posted: June 1, 2011 ; Last revised: December 24, 2012

Suggested Citation

Di Vita, Giuseppe, Endogenous Discount Rate and Elasticity of the Marginal Utility of Consumption (May 30, 2011). Applied Economics Letters, 2012, 19(7):665-669. Available at SSRN: http://ssrn.com/abstract=1855517

Contact Information

Giuseppe Di Vita (Contact Author)

University of Catania - Faculty of Law ( email )

via Gallo, 24
Catania 95124, Catania
Italy
+39 95 230335 (Phone)
+39 95 321654 (Fax)