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Endogenous growth with addictive habits
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Publication details
| Journal | Journal of Mathematical Economics |
|---|---|
| Date | E-pub ahead of print - 3 Dec 2014 |
| Date | Published (current) - Jan 2015 |
| Volume | 56 |
| Number of pages | 11 |
| Pages (from-to) | 15-25 |
| Early online date | 3/12/14 |
| Original language | English |
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.
- Habit formation, Consumption smoothing, Endogenous fluctuations
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