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Limited self-control and long-run growth

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  • Strulik, Holger

Abstract

This paper integrates imperfect self-control into the standard model of endogenous growth. In their long-run savings decisions individuals take into account a cost of self-control, which depends on the consumption temptations of their impatient short-run self. I obtain a closed-form solution for consumption and show that within a certain range of self-control an investment subsidy can be useful in order to reduce consumption and to increase investment, growth, and welfare of the long-run self. A consumption tax, perhaps surprisingly, is found to be counterproductive. It induces individuals with limited self-control to consume even more.

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  • Strulik, Holger, 2016. "Limited self-control and long-run growth," Mathematical Social Sciences, Elsevier, vol. 83(C), pages 1-8.
    • Handle: RePEc:eee:matsoc:v:83:y:2016:i:c:p:1-8
    DOI: 10.1016/j.mathsocsci.2016.06.003
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    1. Hiller, Victor, 2018. "Self-control and the rise and fall of factory discipline," Journal of Development Economics, Elsevier, vol. 133(C), pages 187-200.

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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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