Dr Mauro Bambi mauro.bambi@durham.ac.uk
Associate Professor
Internal habits formation and optimality
Bambi, Mauro; Gozzi, Fausto
Authors
Fausto Gozzi
Abstract
In a very influential model with internal habits, Carroll et al., (2017, 2000), establish that an increase in economic growth may cause a positive change in savings. The optimality of this result, and of many other contributions using a similar framework, has been questioned by some authors who have observed that the parametrization used in these models always implies a utility function not jointly concave in consumption and habits. In this paper, we revisit the optimality issue and, using advanced techniques in Dynamic Programming, we answer the following long-standing open questions: (i) Is the solution found in Carroll et al., (2017, 2000) optimal? (ii) Is it also unique or do other optimal solutions exist?
Citation
Bambi, M., & Gozzi, F. (2020). Internal habits formation and optimality. Journal of Mathematical Economics, 91, 165-172. https://doi.org/10.1016/j.jmateco.2020.09.008
Journal Article Type | Article |
---|---|
Acceptance Date | Sep 28, 2020 |
Online Publication Date | Oct 16, 2020 |
Publication Date | 2020-12 |
Deposit Date | Oct 12, 2020 |
Publicly Available Date | Apr 16, 2022 |
Journal | Journal of Mathematical Economics |
Print ISSN | 0304-4068 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 91 |
Pages | 165-172 |
DOI | https://doi.org/10.1016/j.jmateco.2020.09.008 |
Public URL | https://durham-repository.worktribe.com/output/1290341 |
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Publisher Licence URL
http://creativecommons.org/licenses/by-nc-nd/4.0/
Copyright Statement
© 2020 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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