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Economic development and convergence clubs: the role of inherited tastes and human capital

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  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

We present an overlapping generations model with endogenous growth in which children inherit from the previous generation human capital and life standard aspirations. Adults evaluate their own consumption with respect to a baseline requirement which depends on their parents past consumption. The presence of bequeathed tastes changes significantly the dynamic properties of the model. First, starting with too high aspirations or with too low education spendings lead the economy to a poverty trap. Second, the economy can be characterized by oscillations because inherit human capital may not be sufficient to cover the bequest in terms of higher aspirations. Third, the endogenous growth steady state can be surrounded by a repelling cycle which delimits an attraction basin.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1996024.

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Length: 14
Date of creation: 01 Apr 1996
Date of revision: 00 Oct 1996
Handle: RePEc:ctl:louvir:1996024

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Keywords: endogenous growth; human capital; aspirations; poverty trap; limit cycle;

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References

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  1. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1350, C.E.P.R. Discussion Papers.
  2. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 501-26, May.
  3. Clark, Andrew E. & Oswald, Andrew J. & Warr, Peter B., 1994. "Is job satisfaction u-shaped in age ?," CEPREMAP Working Papers (Couverture Orange) 9407, CEPREMAP.
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  8. de la Croix, David & Urbain, Jean-Pierre, 1996. "Intertemporal Substitution in Import Demand and Habit Formation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 1996002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  17. de La Croix, D. & Michel, P., 1997. "Optimal Growth When Tastes Are Inherited," G.R.E.Q.A.M., Universite Aix-Marseille III 97a21, Universite Aix-Marseille III.
  18. de la Croix, David, 1996. "The dynamics of bequeathed tastes," Economics Letters, Elsevier, Elsevier, vol. 53(1), pages 89-96, October.
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  21. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, Elsevier, vol. 40(6), pages 1353-1375, June.
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  24. David DE LA CROIX & Philippe MICHEL, 2001. "Altruism and Self-Restraint," Annales d'Economie et de Statistique, ENSAE, issue 63-64, pages 233-259.
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Citations

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Cited by:
  1. Sean Lyons & Karen Mayor & Richard S.J. Tol, 2007. "Convergence Of Consumption Patterns During Macroeconomic Transition: A Model Of Demand In Ireland And The Oecd," Working Papers, Research unit Sustainability and Global Change, Hamburg University FNU-141, Research unit Sustainability and Global Change, Hamburg University, revised Aug 2007.
  2. 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.
  3. Toni Mora, 2005. "Conditioning factors on regional European clubs - a distributional approach," ERSA conference papers ersa05p302, European Regional Science Association.
  4. ARTIGE, Lionel & CAMACHO, Carmen & de la CROIX, David, 2003. "Wealth breeds decline : reversals of leadership and consumption habits," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2003054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Neugart, M. & Tuinstra, J., 2001. "Endogenous Fluctuations in the Demand of Education," CeNDEF Working Papers 01-04, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  6. Jordi Caballé & Ana I. Moro Egido, 2008. "The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth," ThE Papers, Department of Economic Theory and Economic History of the University of Granada. 08/02, Department of Economic Theory and Economic History of the University of Granada..
  7. Rillaers, Alexandra, 1998. "Growth and Human Capital Accumulation under Uncertainty," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 1998020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  8. Strulik, Holger, 2013. "How status concerns can make us rich and happy," Center for European, Governance and Economic Development Research Discussion Papers 170, University of Goettingen, Department of Economics.
  9. Rosenblatt-Wisch, Rina, 2008. "Loss aversion in aggregate macroeconomic time series," European Economic Review, Elsevier, Elsevier, vol. 52(7), pages 1140-1159, October.
  10. D Varvarigos, 2004. "Non-neutrality and Uncertainty in a Model of Growth," Centre for Growth and Business Cycle Research Discussion Paper Series, Economics, The Univeristy of Manchester 41, Economics, The Univeristy of Manchester.

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