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Diverse Growth Patterns with External Habit Formation

Author

Listed:
  • Liutang Gong

    (Guanghua School of Management, Peking University)

  • Wei Wang

    (University of International Business and Economics)

Abstract

This paper investigates an external habit formation model with weakly concave utility functions. We show that there exist a continuum of history-dependent balanced growth path (BGP) in this model. This feature of our model can help understand a variety of cross-country growth patterns that are observed in the data.

Suggested Citation

  • Liutang Gong & Wei Wang, 2019. "Diverse Growth Patterns with External Habit Formation," Economics Bulletin, AccessEcon, vol. 39(2), pages 1418-1423.
    • Handle: RePEc:ebl:ecbull:eb-19-00451
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I2-P134.pdf
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    References listed on IDEAS

    as
    1. Hiraguchi, Ryoji, 2011. "A two sector endogenous growth model with habit formation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 430-441, April.
    2. Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen J. Turnovsky, 2004. "Habit Formation, Catching Up with the Joneses, and Economic Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 47-80, March.
    3. Gómez, Manuel A., 2014. "Equilibrium dynamics in a class of one-sector endogenous growth models with external habits: An application of special functions," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 50-54.
    4. Xie Danyang, 1994. "Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria," Journal of Economic Theory, Elsevier, vol. 63(1), pages 97-112, June.
    5. Harl E. Ryder & Geoffrey M. Heal, 1973. "Optimal Growth with Intertemporally Dependent Preferences," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(1), pages 1-31.
    6. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 641-680.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Wei Wang, 2021. "Observational equivalence of balanced growth with external habit formation," Australian Economic Papers, Wiley Blackwell, vol. 60(3), pages 424-434, September.

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    More about this item

    Keywords

    Diverse growth patterns; History dependence; Balanced growth paths; Habit formation;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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