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Capital Accumulation and Habit Formation

  • Ronald Wendner

    ()

    (Department of Economics, Graz University, Austria)

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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File URL: http://www.accessecon.com/pubs/EB/2002/Volume4/EB-02D90007A.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 4 (2002)
Issue (Month): 7 ()
Pages: 1-10

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Handle: RePEc:ebl:ecbull:eb-02d90007
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  1. Scitovsky, Tibor, 1992. "The Joyless Economy: The Psychology of Human Satisfaction," OUP Catalogue, Oxford University Press, number 9780195073478, March.
  2. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, March.
  3. Emmanuel Thibault & Bruno Decreuse, 2001. "Labor productivity and dynamic efficiency," Economics Bulletin, AccessEcon, vol. 4(13), pages 1-6.
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