Growth and Labor Supply in the Presence of Habit Formation in Consumption

U of Texas-Dallas Pol. Econ. Working Paper No. 05/01

9 Pages Posted: 4 Nov 2001  

João Ricardo Faria

University of Texas at Dallas - Department of Economics & Finance

Date Written: October 2001

Abstract

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.

Keywords: Consumption behavior, Labor supply, Economic growth

JEL Classification: D11, D91, O49

Suggested Citation

Faria, João Ricardo, Growth and Labor Supply in the Presence of Habit Formation in Consumption (October 2001). U of Texas-Dallas Pol. Econ. Working Paper No. 05/01. Available at SSRN: https://ssrn.com/abstract=288491 or http://dx.doi.org/10.2139/ssrn.288491

João Ricardo Faria (Contact Author)

University of Texas at Dallas - Department of Economics & Finance ( email )

P.O. Box 830688, GR31
Richardson, TX 75083
United States
972-883-6402 (Phone)
972-883-6297 (Fax)

HOME PAGE: http://www.geocities.com/fariajocka/Index.html

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