Article ID Journal Published Year Pages File Type
5099584 Journal of Economic Dynamics and Control 2011 12 Pages PDF
Abstract
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.
Related Topics
Physical Sciences and Engineering Mathematics Control and Optimization
Authors
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