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Shinya Tsukahara
 
''Habit formation, growth, and Ramsey's conjecture''
( 2017, Vol. 37 No.4 )
 
 
This note deals with long-run distribution of wealth (i.e., ownership pattern of physical capital) in an endogenously growing economy populated by different types of households with habit-forming consumption. We show a counter-intuitive result where the most impatient household (with the highest subjective discount rate) could eventually own “almost all” of the economy's capital, as long as it has the strongest consumption habit. Furthermore, we consider whether patience becomes the sole determinant of eventual wealth distribution in a perpetually growing economy with habit formation, proposing a slight modification to Ramsey's conjecture.
 
 
Keywords: Habit formation, Endogenous growth, Wealth distribution, Ramsey's conjecture
JEL: D9 - Intertemporal Choice and Growth: General
E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
 
Manuscript Received : Oct 06 2017 Manuscript Accepted : Dec 28 2017

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