Endogenous planning horizons: distribution and growth

Abstract

Endogenous growth models havea peculiarly unsatisfactory flavor when considered from the point of view of the less developed economies. According to these models, poor countries have a higher propensity to save then rich, and the very rich could have a tendency to dissave. The classical point of view; by contrast, is that saving originates from profits, and that the poor have a lower propensity to save. This microeconomic viewpoint is consistent with the fact that there tends to be a chasm between the income of the poor and the rich. It is also consistent with the macroeconomic fact that capital tends to flow from the rich to the poor countries, and that these tend to fall into debt. The purpose of this paper is to study distribution in an endogenous growth model in which the poor are more impatient than the rich. This will imply that poor families do not save, while rich families do.