Kirill Borissov

Growth and distribution in an AK-model with endogenous impatience

This paper combines two strands of the literature on inequality and distribution issues: the classical approach, which insists on the division of society into classes characterized by different saving propensities, and the social conflict approach, which considers that inequality inflicts direct and indirect costs to economic development. An endogenous-growth model is studied. We assume that each consumers subjective discount factor is determined endogenously and depends on economic inequality through the following two channels. On the one hand, it is positively related to the individual consumers relative wealth. On the other hand, it is negatively affected by a simple aggregate measure of social conflict. We show that, unlike models with exogenously given discount rates, steady state equilibria in our model is indeterminate and that the set of all equilibria is a continuum which can be parameterized by a simple index of income inequality. The growth rate is ambiguously related to the inequality index. However, under some reasonable assumptions, the growth rate dependence on this index has an inverted U-shaped form.

Indeterminate steady-state equilibria in a one-sector model

Abstract This note introduces an overlapping-generations with-altruism model based on the assumption that the rich are more patient than the poor. All consumers are identical in their exogenous parameters; the division of the population into the rich and the poor occurs endogenously. It is proved that steady-state equilibria are indeterminate.

A characterization of Ramsey equilibrium in a model with limited borrowing

This paper considers a one-sector economic growth model with several infinitely-lived heterogeneous households, who differ both in the discount factors as well as preferences over consumption. Unlike the extreme form of borrowing constraint observed in the classical Ramsey model, recently surveyed in Becker (2006), we allow limited borrowing by the households and prove the existence of a perfect foresight equilibrium. We also show that irrespective of production technology employed by the firms, the capital stock sequence converges to the steady state stock and from some time onward all impatient households are in the maximum borrowing state, whereas the most patient household owns entire capital stock and the debts of all other households.

environmental policy in a dynamic model with heterogeneous agents and voting

We consider a population of infinitely-lived households split into two: some agents have a high discount factor (the patients), and some others have a low one (the impatients). Polluting emissions due to economic activity harm environmental quality. The governmental policy consists in proposing households to vote for a tax to maintain environmental quality. By studying the voting equilibrium at steady states we show that the equilibrium maintenance level is the one of the median voter. We also show that (i) an increase in total factor productivity may produce effects described by the Environmental Kuznets Curve, (ii) an increase in the patience of impatient households may foster environmental quality if the median voter is impatient and maintenance positive, finally (iii) a decrease in inequality among the patient households leads to an increase in environmental quality if the median voter is patient and maintenance is positive. We show that, when the median income of the median voter is lower than the mean (which is empirically founded), our model with heterogeneous agents predicts a lower level of environmental quality than what the representative agent model would predict, and that increasing the public debt decreases the level of environmental quality.

Growth and distribution in a model with endogenous time preferences and borrowing constraints

This paper proposes an AK-model with endogenous time preferences and borrowing constraints. It is assumed that the subjective discount factor of a household is an increasing function of its relative income. First, we describe the structure of balanced-growth equilibrium paths, on which the population splits into two groups: the rich and the poor. Secondly, we study sliding equilibrium paths, show that they become balanced from some time onwards and that eventually all the capital is owned by those households that were the richest at the initial state. It follows that the long-run rate of growth depends on the initial distribution of wealth and income.

Common and Private Property to Exhaustible Resources: Theoretical Implications for Economic Growth

We develop two models of economic growth with exhaustible natural resources and consumers heterogeneous in time preferences. The first model assumes private ownership of natural resources. In the second model, natural resources are commonly owned and the resource extraction rate is chosen by voting. We show that if discount factors are given exogenously, the long-run rate of growth under private property is higher than or equal to that under common property. If the discount factors are formed endogenously, under some circumstances common property can result in a higher rate of growth than private property.

The Rich and the Poor in a Simple Model of Growth and Distribution

We consider a model of economic growth with altruistic consumers who care both about their consumption relative to others and the disposable income of their offsprings. We show that if the parameter accounting for the importance of positional concerns is lower than a certain threshold, then the wealth of all agents converges irrespective of the initial distribution of wealth. If, however, it is higher than the threshold, then all the capital is eventually owned by the households which were the richest from the outset.

Ramsey equilibrium with liberal borrowing

This paper considers a multi-agent one-sector Ramsey equilibrium growth model with borrowing constraints. The extreme borrowing constraint used in the classical version of the model, surveyed in Becker (2006), and the limited form of borrowing constraint examined in Borissov and Dubey (2015) are relaxed to allow more liberal borrowing by the households. A perfect foresight equilibrium is shown to exist in this economy. We describe the steady state equilibria for the liberal borrowing regime and show that as the borrowing regime is progressively liberalized, the steady state wealth inequality increases. Unlike the case of a limited borrowing regime, an equilibrium path need not converge in the case of liberal borrowing regime. We show through an example that a two period cyclic equilibrium exists when agents are allowed to borrow against their two period future wage income. This result is similar to the possibility of non-convergent equilibrium capital stock sequences in the model with no borrowing.

Globalization, Skill Accumulation and the Skill Premium

We analyze the impact of globalization upon the skill premium (inequality) in advanced countries from a two‐goods North–South model with skill accumulation. Globalization consists of an increase in the size of the South. Its impact on inequality depends on its intensity and on the pre‐globalization proportion of skilled workers. The post‐globalization inequality is a non‐monotonic function of the pre‐globalization proportion of skilled workers and of the globalization intensity. The impact is different for the generation in work and for the following generations. There is a threshold value of the skill endowment under (above) which inequality is lower (higher) after than before globalization.

Stability of Production Prices: A Modification to the Full‐Cost Approach

An approach to the problem of the stability of production prices generalizing the full-cost approach is proposed. It is based on comparing current profit rates with a target level: if the current profit rate in a sector is lower (higher) than the target level, the price of the product of this sector increases (decreases). It is proved that this leads to stability of the production prices in two models with fixed capital. In the first model, it is assumed that the author is given a nominal wage rate and that the target profit rate is formed exogenously. In the second model, he is implicitly given a real wage rate and the target profit rate is formed endogenously. Copyright 1999 by Blackwell Publishers Ltd and The Victoria University of Manchester