Relative deprivation, time preference, and economic growth

We study the growth process among a large group of economies where consumption relative to reference determines discount factor household agents. characterize all possible balanced paths and their stability properties. The model can explain why two having similar production technologies, preferences, total productivity rates differ in labor supply behavior have diverging depending on initial conditions. Numerical analysis suggests that path divergence is plausible based cross-country differences savings rates. History dependence time preference also generates realistic transitional dynamics.