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Endogenous Growth with Intertemporally Dependent Preferences

Author

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  • Ferraguto Giuseppe

    () (Bocconi University)

  • Pagano Patrizio

    () (Bank of Italy)

Abstract

This paper presents an endogenous growth model with intertemporally dependent preferences and "Ak" technology. We derive sufficient conditions for a balanced growth path to be an equilibrium, provide a full characterization of the equilibrium dynamics of the economy, and explore the implications of habit formation for the patterns of cross-country growth and convergence. Finally, we show that the alternative departure from the standard assumption of isoelastic preferences represented by the use of a Stone-Geary utility function can be interpreted as a special case of the model with habit formation. Our results highlight the importance of preferences in the dynamics of growth, a point neglected in most of the literature.

Suggested Citation

  • Ferraguto Giuseppe & Pagano Patrizio, 2003. "Endogenous Growth with Intertemporally Dependent Preferences," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-40, November.
  • Handle: RePEc:bpj:bejmac:v:contributions.3:y:2003:i:1:n:10
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    References listed on IDEAS

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    1. Fornari, Fabio & Monticelli, Carlo & Pericoli, Marcello & Tivegna, Massimo, 2002. "The impact of news on the exchange rate of the lira and long-term interest rates," Economic Modelling, Elsevier, vol. 19(4), pages 611-639, August.
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    Cited by:

    1. Gómez Manuel A., 2010. "Endogenous Growth, Habit Formation and Convergence Speed," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-32, January.
    2. Perera-Tallo, Fernando, 2017. "Growing income inequality due to biased technological change," Journal of Macroeconomics, Elsevier, vol. 52(C), pages 23-38.
    3. Manuel A. Gómez, 2010. "The welfare cost of external habits: a quantitative assessment," Estudios de Economia, University of Chile, Department of Economics, vol. 37(1 Year 20), pages 5-26, June.
    4. Luca Dedola & Eugenio Gaiotti & Luca Silipo, 2001. "Money demand in the euro area: do national differences matter?," Temi di discussione (Economic working papers) 405, Bank of Italy, Economic Research and International Relations Area.
    5. Pagano, Patrizio, 2004. "Habit persistence and the marginal propensity to consume in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 18(3), pages 316-329, September.
    6. Pittel Karen, 2005. "Diskontraten: Endogen oder nicht endogen? / Disounting: Endogenous or not Endogenous?: Eine umweltrelevante Fragestellung / Implications for the Environment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(4), pages 441-458, August.
    7. Manuel Gómez, 2010. "A note on external habits and efficiency in the AK model," Journal of Economics, Springer, vol. 99(1), pages 53-64, February.

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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
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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