Limited self-control and long-run growth
Holger Strulik ()
No 181, Center for European, Governance and Economic Development Research Discussion Papers from University of Goettingen, Department of Economics
This paper integrates imperfect self-control into the standard model of endogenous growth. Individuals are conceptualized as dual-selves consisting of a long-run planner and a short-run doer. The long-run self can partly control the short-run self´s strife for immediate gratification. It is shown that the solution is structurally equivalent to the one of the standard endogenous growth model as long as self-control is sufficiently strong. 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 counterproductive. It induces individuals with limited self-control to consume even more.
Keywords: temptation; self-control; consumption; investment; endogenous growth (search for similar items in EconPapers)
JEL-codes: D91 E21 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-evo, nep-gro and nep-mac
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Journal Article: Limited self-control and long-run growth (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:181
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