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Should the Neoclassical growth model include the saving flow in the Utility function?

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  • Khelifi, Atef

Abstract

Despite ‘joy of giving models’ have been extensively examined in the literature, the Ramsey growth model has never been explored under the assumption of a direct preference for bequeathing savings that are reinvested. This assumption implies a Utility function depending on both consumption and savings, which may also be motivated as one that captures a direct preference for thriftiness or wealth accumulation arguably involved. The resulting growth model generalizes those accounting for the capitalist spirit as Zou (1994), and shows that the restrictive standard one is perhaps not the actual optimized version of the Solow model. (JEL O41, E21, D91)

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  • Khelifi, Atef, 2014. "Should the Neoclassical growth model include the saving flow in the Utility function?," MPRA Paper 59751, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59751
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    References listed on IDEAS

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    6. Kuznitz, Arik & Kandel, Shmuel & Fos, Vyacheslav, 2008. "A portfolio choice model with utility from anticipation of future consumption and stock market mean reversion," European Economic Review, Elsevier, vol. 52(8), pages 1338-1352, November.
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    8. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    9. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2002. "The Importance of Bequests and Life-Cycle Saving in Capital Accumulation: A New Answer," American Economic Review, American Economic Association, vol. 92(2), pages 274-278, May.
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    More about this item

    Keywords

    Bequest; Capitalist Spirit; Ramsey Growth model; Savings; Joy-of-giving; Optimal control theory;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E0 - Macroeconomics and Monetary Economics - - General
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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