A two sector endogenous growth model with habit formation
In this paper, we study an endogenous growth model with physical and human capital in which consumption habits enter the utility function multiplicatively. We show that although the utility function with multiplicative habits is nonconcave and unbounded, an interior optimal growth path still exists, it is uniquely determined and it converges to a balanced growth path. We also find that habit formation in consumption lowers the convergence speed of the optimal path toward the balanced growth path.
Year of publication: |
2011
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Authors: | Hiraguchi, Ryoji |
Published in: |
Journal of Economic Dynamics and Control. - Elsevier, ISSN 0165-1889. - Vol. 35.2011, 4, p. 430-441
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Publisher: |
Elsevier |
Keywords: | Habit formation Economic growth Human capital |
Saved in:
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