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Capital Accumulation and Habit Formation

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Author Info
Ronald Wendner () (Department of Economics, Graz University, Austria)

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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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Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 4 (2002)
Issue (Month): ()
Pages: 1-10
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Handle: RePEc:ebl:ecbull:eb-02d90007

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Related research
Keywords: habits; capital accumulation; overlapping generations;

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Find related papers by JEL classification:
D9 - Microeconomics - - Intertemporal Choice and Growth
D1 - Microeconomics - - Household Behavior

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bruno Decreuse & Emmanuel Thibault, 2001. "Labor productivity and dynamic efficiency," Economics Bulletin, Economics Bulletin, vol. 4, pages 1-6. [Downloadable!]
  2. Lahiri, Amartya & Puhakka, Mikko, 1998. "Habit Persistence in Overlapping Generations Economies under Pure Exchange," Journal of Economic Theory, Elsevier, vol. 78(1), pages 176-186, January. [Downloadable!] (restricted)
    Other versions:
  3. Ihori, Toshihiro, 1978. "The Golden Rule and the Role of Government in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 68(3), pages 389-96, June. [Downloadable!] (restricted)
  4. Galor, Oded & Ryder, Harl E., 1989. "Existence, uniqueness, and stability of equilibrium in an overlapping-generations model with productive capital," Journal of Economic Theory, Elsevier, vol. 49(2), pages 360-375, December. [Downloadable!] (restricted)
  5. Deaton, A. & Grosh, M., 1998. "Consumption," Papers 191, Princeton, Woodrow Wilson School - Development Studies.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Simone Valente, 2006. "Notes on Habit Formation and Socially Optimal Growth," Economics working paper series 06/48, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  2. Masako Ikefuji & Kazuo Mino, 2009. "Internal vs. External Habit Formation in a Growing Economy with Overlapping Generations," ISER Discussion Paper 0750, Institute of Social and Economic Research, Osaka University. [Downloadable!]
    Other versions:
  3. Belbute, José & Caleiro, António, 2009. "Measuring the Persistence on Consumption in Portugal," MPRA Paper 15116, University Library of Munich, Germany. [Downloadable!]
  4. Ingmar Schumacher & Benteng Zou, 2005. "Pollution perception: An inquiry into intergenerational equity," Working Papers 371, Bielefeld University, Institute of Mathematical Economics. [Downloadable!]
  5. Takeshi Nakata, 2007. "Habit Formation, Parents' Education Spending, and Growth," Economics Bulletin, Economics Bulletin, vol. 5(2), pages 1-9. [Downloadable!]
  6. Ingmar, SCHUMACHER & Benteng, ZOU, 2006. "Habit in Pollution. A Challenge for Intergenerational Equity," Discussion Papers (ECON - Département des Sciences Economiques) 2006004, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
    Other versions:
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