Two economies, represented by Diamond-type overlapping-generations models and differing only in their pure rates of time preference, are joined together. Capital formation, balance-of-payments behavior, and welfare are compared under autarky and openness. With a positive natural rate of growth, the low-time-preference country runs a current account surplus in the steady state but not necessarily outside it. If preexisting capital is not shiftable between countries, integration in the world economy makes the high-time-preference country worse off in the short run. The ranking of stationary utility levels under autarky and openness is ambiguous.

[The continuous version of the end-of-period equilibrium specification is shown to exist when there is a sequence of temporary equilibria. This is also a sufficient condition for the continuous versions of the beginning-of-period and end-of-period specifications to be equivalent. This refutes Foley's contention that perfect foresight is a necessary condition for these results.]

Two economies, represented by Diamond-type overlapping-generations models and differing only in their pure rates of time preference, are joined together. Capital formation, balance-of-payments behavior, and welfare are compared under autarky and openness. With a positive natural rate of growth, the low-time-preference country runs a current account surplus in the steady state but not necessarily outside it. If preexisting capital is not shiftable between countries, integration in the world economy makes the high-time-preference country worse off in the short run. The ranking of stationary utility levels under autarky and openness is ambiguous.

The continuous version of the end-of-period equilibrium specification is shown to exist when there is a sequence of temporary equilibria. This is also a sufficient condition for the continuous versions of the beginning-of-period and end-of-period specifications to be equivalent. This refutes Foley's contention that perfect foresight is a necessary condition for these results.