Habit formation, work ethics and technological progress

Work ethics affect labour supply. This idea is modelled assuming that work is habit forming. We introduce working habits in a neoclassical growth model and compare its outcomes with a model without habit formation. In addition, we analyse the impact of different forms of technical progress. The findings are that (i) labour supply in the habit formation case is higher than in the neoclassical case; (ii) unlike in the neoclassical case, labour supply in the presence of habit formation depends on the kind of technical progress; and (iii) the kind of technical progress will hence affect the steady-state levels of consumption, capital stock and output. Copyright Blackwell Publishing Ltd and The Victoria University of Manchester, 2004.