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Capital Accumulation and Habit Formation

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  • Ronald Wendner

    ()
    (Department of Economics, Graz University, Austria)

Abstract

This paper investigates the impact of habits on savings and steady state capital intensity. Within the framework of an OLG economy with productive capital, a rise in the strength of habits increases savings if the steady state is asymptotically stable. Consequently, the steady state capital intensity as implied by an OLG model with habits is higher compared to the case with time-separable utility. If, however the initial steady state is unstable, a rise in the strength of habits lowers savings.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 4 (2002)
Issue (Month): 7 ()
Pages: 1-10

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Handle: RePEc:ebl:ecbull:eb-02d90007

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References

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  1. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198288244, October.
  2. Emmanuel Thibault & Bruno Decreuse, 2001. "Labor productivity and dynamic efficiency," Economics Bulletin, AccessEcon, vol. 4(13), pages 1-6.
  3. Scitovsky, Tibor, 1992. "The Joyless Economy: The Psychology of Human Satisfaction," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195073478, October.
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Cited by:
  1. Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2005. "Estate Taxes, Consumption Externalities, and Altruism," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 658.05, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Ingmar, SCHUMACHER & Benteng, ZOU, 2006. "Habit in Pollution. A Challenge for Intergenerational Equity," Discussion Papers (ECON - Département des Sciences Economiques), Université catholique de Louvain, Département des Sciences Economiques 2006004, Université catholique de Louvain, Département des Sciences Economiques.
  3. Gori, Luca & Sodini, Mauro, 2012. "Indeterminacy and nonlinear dynamics in an OLG growth model with endogenous labour supply and inherited tastes," MPRA Paper 35942, University Library of Munich, Germany.
  4. Simone Valente, 2006. "Notes on Habit Formation and Socially Optimal Growth," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 06/48, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  5. Masako Ikefuji & Kazuo Mino, 2009. "Internal vs. External Habit Formation in a Growing Economy with Overlapping Generations," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0750, Institute of Social and Economic Research, Osaka University.
  6. Tetsuo Ono, 2002. "Is habitual consumption harmful to the environment?," Economics Bulletin, AccessEcon, vol. 17(1), pages 1-10.
  7. Luciano Fanti, 2012. "Habits, aspirations and endogenous fertility," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2012/143, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  8. Belbute, José & Caleiro, António, 2010. "Cross Country Evidence on Consumption Persistence," MPRA Paper 22008, University Library of Munich, Germany.
  9. Ingmar Schumacher & Benteng Zou, 2005. "Pollution perception: An inquiry into intergenerational equity," Working Papers, Bielefeld University, Center for Mathematical Economics 371, Bielefeld University, Center for Mathematical Economics.
  10. Belbute, José & Caleiro, António, 2009. "Measuring the Persistence on Consumption in Portugal," MPRA Paper 15116, University Library of Munich, Germany.
  11. Takeshi Nakata, 2007. "Habit Formation, Parents' Education Spending, and Growth," Economics Bulletin, AccessEcon, vol. 5(2), pages 1-9.

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