IDEAS home Printed from https://ideas.repec.org/a/bpj/sndecm/v11y2007i2n2.html
   My bibliography  Save this article

Equilibrium Efficiency in the Ramsey Model with Habit Formation

Author

Listed:
  • Gómez Manuel A.

    () (University of A Coruña)

Abstract

This paper analyzes the equilibrium efficiency in a Ramsey model with habit formation. Uniqueness and saddle-path stability of the steady state is proved analytically. The competitive equilibrium is efficient at the steady state. However, the presence of externalities arising from average past consumption renders the competitive equilibrium inefficient off the steady state because agents do not take (fully) into account the indirect effect that consumption has in utility through its influence on habits. The efficient equilibrium can be decentralized by means of a consumption tax that converges to an arbitrary constant value, or by means of an income tax that converges to zero.

Suggested Citation

  • Gómez Manuel A., 2007. "Equilibrium Efficiency in the Ramsey Model with Habit Formation," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(2), pages 1-34, May.
  • Handle: RePEc:bpj:sndecm:v:11:y:2007:i:2:n:2
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/snde.2007.11.2/snde.2007.11.2.1410/snde.2007.11.2.1410.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hiraguchi, Ryoji, 2011. "A two sector endogenous growth model with habit formation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 430-441, April.
    2. Roman Naryshkin & Matt Davison, 2009. "Utility Function and Optimum Consumption in the models with Habit Formation and Catching up with the Joneses," Papers 0909.3655, arXiv.org.
    3. Wirl Franz & Novak Andreas J. & Hof Franz X., 2008. "Happiness due to Consumption and its Increases, Wealth and Status," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 12(4), pages 1-34, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:sndecm:v:11:y:2007:i:2:n:2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.