Growth and Labor Supply in the Presence of Habit Formation in Consumption
João Ricardo Faria
University of Texas at Dallas - Department of Economics & Finance
U of Texas-Dallas Pol. Econ. Working Paper No. 05/01
This paper examines a model with habit formation in consumption. The model leads to higher equilibrium values in consumption, output, capital accumulation and labor supply than the neoclassical growth model with elastic labor supply. Comparative static analysis shows that an increase in the importance of consumption in the recent past in habit formation is associated with a decrease in growth and labor supply. On the other hand, an increase of the importance of habit stock relatively to present consumption, is found to stimulate growth and labor supply.
Number of Pages in PDF File: 9
Keywords: Consumption behavior, Labor supply, Economic growth
JEL Classification: D11, D91, O49
Date posted: November 4, 2001
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