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Endogenous Growth with Addictive Habits

Emmanuelle Augeraud-Véron () and Mauro Bambi

Discussion Papers from Department of Economics, University of York

Abstract: In this paper, we investigate the global dynamics of an endogenous growth model with linear technology and addictive habits. We find feasible parameters’ conditions under which: a) the resulting equilibrium consumption path is steeper than in a standard AK model; b) endogenous fluctuations in the form of damping fluctuations around the balanced growth path emerge; c) the Easterlin’s paradox emerges. The relevance of these results is explained comparing our findings with the results already known in the existing literature.

Keywords: Habit formation; consumption smoothing, endogenous fluctuations. (search for similar items in EconPapers)
JEL-codes: E00 E21 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ger, nep-gro and nep-mac
Date: 2014-05
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