Capital deepening and impatience equivalence in stochastic aggregative growth models (Q1099047)

This paper analyzes the aggregative growth model subject to random production shocks. It is shown that for a higher discount factor the associated optimal plan maintains higher capital input at every time period and for almost all environments, in both the finite and infinite horizon problems. It is further shown that two alternative notions of decreasing impatience, lengthening the horizon (for a fixed discount factor) and increasing the discount factor (for a fixed horizon) are, in a precise sense, equivalent. Discount factor insensitivity is also established.