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Growth and labor supply in the presence of habit formation in consumption

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  • Joao Ricardo Faria

    (School of Social Sciences, University of Texas at Dallas)

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.

Suggested Citation

  • Joao Ricardo Faria, 2002. "Growth and labor supply in the presence of habit formation in consumption," Economics Bulletin, AccessEcon, vol. 4(5), pages 1-5.
    • Handle: RePEc:ebl:ecbull:eb-02d10002
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    File URL: http://www.accessecon.com/pubs/EB/2002/Volume4/EB-02D10002A.pdf
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    References listed on IDEAS

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    6. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    7. Faria, Joao Ricardo, 2001. "Habit formation in a monetary growth model," Economics Letters, Elsevier, vol. 73(1), pages 51-55, October.
    8. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-543, June.
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    Cited by:

    1. João Ricardo Faria & Miguel A. León‐Ledesma, 2004. "Habit formation, work ethics and technological progress," Manchester School, University of Manchester, vol. 72(3), pages 403-413, June.

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    More about this item

    Keywords

    Consumption behavior;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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