RECURSIVE PREFERENCE, MOOD FLUCTUATION AND WELFARE COST OF REDUCED GROWTH

Zhiyong Dong (), Qingyang Gu () and Xiaoming Zhu
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Zhiyong Dong: School of Economics, Peking University, Beijing, 100871, China
Qingyang Gu: Economics Division, School of Social Sciences and Humanities, Nanyang Technological University, Singapore 639798, Singapore
Xiaoming Zhu: Toulouse School of Economics, University de Toulouse, France

The Singapore Economic Review (SER), 2009, vol. 54, issue 02, 263-281

Abstract: This paper studies the mood fluctuation of a typical consumer with recursive preference and the welfare cost of reduced growth and business cycle. We estimate the welfare cost using discrete recursive function as well as conduct simulation in order to compare our results with other existing research findings. Our findings are in line with traditional literature whereby the welfare cost of reduced growth is larger than that of business cycle; but our results show that these past measures understate the welfare cost of reduced growth and business cycle.

Keywords: Recursive preference; mood fluctuation; economic growth; welfare cost (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1142/S0217590809003331

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