Notes on Habit Formation and Socially Optimal Growth
The interaction between habit formation and pollution-type ex- ternalities modifies the social optimum through discount effects and elasticity effects. If the substitution elasticity does not exceed unity, both effects reduce optimal consumption and capital in the long run, and the optimal capital-income tax increases with the relative impor- tance of habits. Similar results hold with high elasticity if the relative importance of habits is sufficiently high.
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- Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen J. Turnovsky, 2004.
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- Ronald Wendner, 2002. "Capital Accumulation and Habit Formation," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-10.
- Wendner, Ronald, 2003. "Do habits raise consumption growth?," Research in Economics, Elsevier, vol. 57(2), pages 151-163, June.
- Carroll, Christopher D., 2000. "Solving consumption models with multiplicative habits," Economics Letters, Elsevier, vol. 68(1), pages 67-77, July.
- Christopher D Carroll, 2000. "Solving Consumption Models with Multiplicative Habits," Economics Working Paper Archive 421, The Johns Hopkins University,Department of Economics.
- Jeffrey C. Fuhrer, 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models," American Economic Review, American Economic Association, vol. 90(3), pages 367-390, June.
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