Internal vs. External Habit Formation in a Growing Economy with Overlapping Generations
This paper explores the roles of internal and external habit formation in a simple model of endogenous growth with overlapping generations. Unlike the representative agent settings in which the distinction between internal and external habits may not yield significant qualitative differences in working of the model economy, we show that the internal and external habit persistence in overlapping generations economies may have qualitatively different effects on the steady-state characterization as well as on the dynamic behavior of the economy. We also confirm that in an overlapping generations framework, whether the habits in the utility function takes subtractive or multiplicative forms may be critical both for long-run growth and for transitional dynamics.
|Date of creation:||Aug 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.iser.osaka-u.ac.jp/index-e.html
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grishchenko, Olesya V., 2010. "Internal vs. external habit formation: The relative importance for asset pricing," Journal of Economics and Business, Elsevier, vol. 62(3), pages 176-194, May.
- Uribe, Martin, 2002. "The price-consumption puzzle of currency pegs," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 533-569, April.
- Lahiri, Amartya & Puhakka, Mikko, 1998.
"Habit Persistence in Overlapping Generations Economies under Pure Exchange,"
Journal of Economic Theory,
Elsevier, vol. 78(1), pages 176-186, January.
- Amartya Lahiri & Mikko Puhakka, 1996. "Habit Persistence in Overlapping Generations Economies Under Pure Exchange," UCLA Economics Working Papers 754, UCLA Department of Economics.
- Ronald Wendner, 2002. "Capital Accumulation and Habit Formation," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-10.
- Mino, Kazuo, 2006. "Consumption Externalities and Capital Accumulation in an Overlapping Generations Economy," MPRA Paper 17016, University Library of Munich, Germany.
- Gómez, Manuel A., 2008. "Convergence speed in the Ak endogenous growth model with habit formation," Economics Letters, Elsevier, vol. 100(1), pages 16-21, July.
- Wendner, Ronald, 2003. "Do habits raise consumption growth?," Research in Economics, Elsevier, vol. 57(2), pages 151-163, June.
- repec:ebl:ecbull:v:4:y:2002:i:7:p:1-10 is not listed on IDEAS
- Harbaugh, Richmond, 1996. "Falling behind the Joneses: relative consumption and the growth-savings paradox," Economics Letters, Elsevier, vol. 53(3), pages 297-304, December.
- Kazuo Mino, 2008.
"Growth And Bubbles With Consumption Externalities,"
The Japanese Economic Review,
Japanese Economic Association, vol. 59(1), pages 33-53.
- Hiraguchi, Ryoji, 2008. "The overlapping generations model with habit formation: A comment," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 4016-4017, December.
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-37, October.
When requesting a correction, please mention this item's handle: RePEc:dpr:wpaper:0750. 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: (Fumiko Matsumoto)
If references are entirely missing, you can add them using this form.