Local and Global Dynamics in an Overlapping Generations Model with Endogenous Time Discounting

The aim of this paper is to develop an overlapping generations model with endogenous time preference. We assume that the individual’s rate of time preference is determined by the labour supply at the economy wide level. We show that when the rate of impatience is constant, a unique steady state exists, which is saddle-point stable for several constellations of parameter values. In contrast, when the rate of impatience is determined by the aggregate labour supply, multiple steady may exist, and the equilibrium dynamics may exhibit (local or global) indeterminacy and complex behaviour.