Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263720 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9790
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We consider a neoclassical growth model with quasi-hyperbolic discounting under Kantian optimization: each temporal self acts in a way that they would like every future self to act. We introduce the notion of a Kantian policy as an outcome of Kantian optimization in a given class of policies. We derive and characterize a Kantian policy in the class of policies with a constant saving rate for an economy with log-utility and Cobb–Douglas production technology and an economy with isoelastic utility and linear production technology. In all cases, the Kantian saving rate is higher than the saving rate of sophisticated agents, and a Kantian path Pareto dominates a sophisticated path.
Subjects: 
quasi-hyperbolic discounting
time inconsistency
Kantian equilibrium
sophisticated agents
saving rate
welfare
JEL: 
C70
D15
D91
E21
O40
Document Type: 
Working Paper
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