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Habit formation, growth, and Ramsey's conjecture

Shinya Tsukahara ()
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Shinya Tsukahara: Kyoto University of Foreign Studies

Economics Bulletin, 2017, vol. 37, issue 4, 2871-2880

Abstract: This note deals with long-run distribution of wealth (i.e., ownership pattern of physical capital) in an endogenously growing economy populated by different types of households with habit-forming consumption. We show a counter-intuitive result where the most impatient household (with the highest subjective discount rate) could eventually own “almost all†of the economy's capital, as long as it has the strongest consumption habit. Furthermore, we consider whether patience becomes the sole determinant of eventual wealth distribution in a perpetually growing economy with habit formation, proposing a slight modification to Ramsey's conjecture.

Keywords: Habit formation; Endogenous growth; Wealth distribution; Ramsey's conjecture (search for similar items in EconPapers)
JEL-codes: D9 E2 (search for similar items in EconPapers)
Date: 2017-12-28
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