Abstract
Models of nonexponential time discount ing help to explain a variety of regularities in economic behavior, including contract choice (Stefano DellaVigna and Ulrike Malmendier 2004), procrastination (Ted O'Donoghue and Matthew Rabin 1999; Dan Ariely and Klaus Wertenbroch 2002), and life-cycle consumption patterns (David Laibson, Andrea Repetto and Tobacman 2007). This paper applies the quasi hyperbolic time discounting model to the study of wealth inequality. A large literature analyzes the nature and causes of inequality and poverty traps.1 Here, first I theoretically examine a simple, autarkic mechanism that can cause exogenous dispersion in wealth to persist and grow. Specifically, quasi hyperbolic discount functions endogenously
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