Hyperbolic Policymakers and Economic Growth

In this note I explore how a non-constant rate of time preference on the part of policymakers affects economic growth. In a simple dynamic general equilibrium model I show that if the incumbent government has a rate of time preference in the form of a quasi-hyperbolic discounting function, tax rates can be substan-tially higher and economic growth considerably lower than the standard case of exponential discounting. 1.