A simple dynastic economy with parental time investment in children's patience

- A growth model is built in a dynastic economy with endogenous time preferences.
- Altruistic parents devote their time so that their children become patient.
- An economy follows an unstable path due to parental investment in children's patience.
- Indeterminacy arises with a small parental time spent along with impatient children.
- In contrast, a balanced growth path is unique in the corresponding social optimum.

This article explores the dynamics of a general equilibrium when an individual's rate of time preferences is endogenous in a dynastic competitive economy. We postulate that altruistic parents allocate time to make their children patient to improve their lifetime welfare. The paper shows multiplicity and instability of the competitive equilibrium. Local and global indeterminacy emerges due to complementarity between a balanced growth rate and parental time allocation. Indeterminacy implies income and growth disparity among generations. In contrast, a balanced growth path is unique and determinate in the corresponding social optimum. A unique social optimum introduces a potential policy instrument for stabilizing a cyclical competitive equilibrium.