Limited self-control and long-run growth

Holger Strulik

Mathematical Social Sciences, 2016, vol. 83, issue C, 1-8

Abstract: This paper integrates imperfect self-control into the standard model of endogenous growth. In their long-run savings decisions individuals take into account a cost of self-control, which depends on the consumption temptations of their impatient short-run self. I obtain a closed-form solution for consumption and show that within a certain range of self-control an investment subsidy can be useful in order to reduce consumption and to increase investment, growth, and welfare of the long-run self. A consumption tax, perhaps surprisingly, is found to be counterproductive. It induces individuals with limited self-control to consume even more.

Date: 2016
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Working Paper: Limited self-control and long-run growth (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:83:y:2016:i:c:p:1-8

DOI: 10.1016/j.mathsocsci.2016.06.003

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