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

  • de la Croix, David

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

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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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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  1. Philippe Monfort & David de la Croix, 2000. "Education funding and regional convergence," Journal of Population Economics, Springer, vol. 13(3), pages 403-424.
  2. de la Croix, David, 1996. "The dynamics of bequeathed tastes," Economics Letters, Elsevier, vol. 53(1), pages 89-96, October.
  3. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
  4. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  5. van Ewijk, Casper, 1982. "A Spectral Analysis of the Kondratieff-Cycle," Kyklos, Wiley Blackwell, vol. 35(3), pages 468-99.
  6. Croix,David,de la & Urbain,Jean-Pierre, 1996. "Intertemporal substitution in import demand and habit formation ," Research Memorandum 003, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  7. Hercovitz, Z. & Sampson, M., 1989. "Output Growth, The Real Wage, And Employment Fluctuations," RCER Working Papers 179, University of Rochester - Center for Economic Research (RCER).
  8. Croix, David de la & Michel, Philippe, 1999. "Optimal growth when tastes are inherited," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 519-537, February.
  9. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  10. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  11. Benhabib, Jess & Gali, Jordi, 1995. "On Growth and Indeterminacy: Some Theory and Evidence," Working Papers 95-08, C.V. Starr Center for Applied Economics, New York University.
  12. Alex Michalos, 1980. "Satisfaction and happiness," Social Indicators Research, Springer, vol. 8(4), pages 385-422, December.
  13. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
  14. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
  15. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-69, July.
  16. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  17. Robert E Lucas, 1999. "Making a Miracle," Levine's Working Paper Archive 2101, David K. Levine.
  18. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
  19. Nehru, Vikram & Swanson, Eric & Dubey, Ashutosh, 1995. "A new database on human capital stock in developing and industrial countries: Sources, methodology, and results," Journal of Development Economics, Elsevier, vol. 46(2), pages 379-401, April.
  20. de la Croix, David & Michel, Philippe, 1997. "Altruism and self-refrain," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Apr 1998.
  21. de la Croix, David, 1995. "Economic Growth and the Relativity of Satisfaction," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1995023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  22. Easterlin, Richard A, 1971. "Does Human Fertility Adjust to the Environment?," American Economic Review, American Economic Association, vol. 61(2), pages 399-407, May.
  23. Solomou, Solomos, 1986. "Non-Balanced Growth and Kondratieff Waves in the World Economy, 1850–1913," The Journal of Economic History, Cambridge University Press, vol. 46(01), pages 165-169, March.
  24. Clark, Andrew E. & Oswald, Andrew J. & Warr, Peter B., 1994. "Is job satisfaction u-shaped in age ?," CEPREMAP Working Papers (Couverture Orange) 9407, CEPREMAP.
  25. Becker, G.S., 1991. "Habits, Addictions, and Traditions," University of Chicago - Economics Research Center 91-8, Chicago - Economics Research Center.
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