Abstract
For infinite-horizon models with recursive preferences the condition known as increasing marginal impatience is often adopted, but the condition is not fully understood in the literature. This paper shows that increasing marginal impatience is equivalent to the intuitive property that the substitutability between the consumption levels in two different periods is a decreasing function of the distance between the periods.
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Kamihigashi, T. Increasing marginal impatience and intertemporal substitution. Zeitschr. f. Nationalökonomie 72, 67–79 (2000). https://doi.org/10.1007/BF01231489
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DOI: https://doi.org/10.1007/BF01231489
Keywords
- Recursive preferences
- increasing marginal impatience
- local substitution
- elasticity of substitutability
- durable consumption