Endogenous growth with addictive habits

Mauro Bambi; Emmanuelle Augeraud-Veron

doi:10.1016/j.jmateco.2014.11.002

Endogenous growth with addictive habits

Mauro Bambi, Emmanuelle Augeraud-Veron

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

In this paper, we investigate the global dynamics of an endogenous growth model with linear technology and addictive habits. We find feasible parameters’ conditions under which: (a) the resulting equilibrium consumption path is steeper than in a standard AK model; (b) endogenous fluctuations in the form of damping fluctuations around the balanced growth path emerge; (c) the Easterlin’s paradox emerges. The relevance of these results is explained comparing our findings with the results already known in the existing literature.

Original language	English
Pages (from-to)	15-25
Number of pages	11
Journal	Journal of Mathematical Economics
Volume	56
Early online date	3 Dec 2014
DOIs	https://doi.org/10.1016/j.jmateco.2014.11.002
Publication status	Published - Jan 2015

Keywords

Habit formation
Consumption smoothing
Endogenous fluctuations

Access to Document

10.1016/j.jmateco.2014.11.002

Cite this

@article{18ac4162b25644cfb86ae95bc14662f0,

title = "Endogenous growth with addictive habits",

abstract = "In this paper, we investigate the global dynamics of an endogenous growth model with linear technology and addictive habits. We find feasible parameters{\textquoteright} conditions under which: (a) the resulting equilibrium consumption path is steeper than in a standard AK model; (b) endogenous fluctuations in the form of damping fluctuations around the balanced growth path emerge; (c) the Easterlin{\textquoteright}s paradox emerges. The relevance of these results is explained comparing our findings with the results already known in the existing literature.",

keywords = "Habit formation, Consumption smoothing, Endogenous fluctuations",

author = "Mauro Bambi and Emmanuelle Augeraud-Veron",

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AU - Augeraud-Veron, Emmanuelle

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AB - In this paper, we investigate the global dynamics of an endogenous growth model with linear technology and addictive habits. We find feasible parameters’ conditions under which: (a) the resulting equilibrium consumption path is steeper than in a standard AK model; (b) endogenous fluctuations in the form of damping fluctuations around the balanced growth path emerge; (c) the Easterlin’s paradox emerges. The relevance of these results is explained comparing our findings with the results already known in the existing literature.

KW - Habit formation

KW - Consumption smoothing

KW - Endogenous fluctuations

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DO - 10.1016/j.jmateco.2014.11.002

M3 - Article

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VL - 56

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JF - Journal of Mathematical Economics

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