<abstract xmlns="http://www.w3.org/1999/xhtml"><p> Background: Although there are many formal models about interactions among habit formation, preference change and the economic growth, only a few formal models examine implications of habit formation and preference change for the economic growth with resources. <bold>Objectives: </bold>This paper builds an economic growth model with endogenous physical capital, renewable resources, habit formation and preference. <bold>Methods: </bold>Although it is influenced by the Ramsey growth theory with time preference and habit formation, the paper applies a new approach to the household behaviour. <bold>Results: </bold>We plot the motion of the economy and conduct a comparative dynamic analysis with regard to certain parameters to obtain insights into interactions between the preference and the economic structural changes. <bold>Conclusions: </bold>We have shown that habit formation and preference change have significant effects on the economic grow and resources utilization both with regard to the transitional paths and the long-run equilibrium.</p></abstract>

Background: Although there are many formal models about interactions among habit formation, preference change and the economic growth, only a few formal models examine implications of habit formation and preference change for the economic growth with resources. Objectives: This paper builds an economic growth model with endogenous physical capital, renewable resources, habit formation and preference. Methods: Although it is influenced by the Ramsey growth theory with time preference and habit formation, the paper applies a new approach to the household behaviour. Results: We plot the motion of the economy and conduct a comparative dynamic analysis with regard to certain parameters to obtain insights into interactions between the preference and the economic structural changes. Conclusions: We have shown that habit formation and preference change have significant effects on the economic grow and resources utilization both with regard to the transitional paths and the long-run equilibrium.

Habit Formation and Preference Change with Capital and Renewable Resources

Ritsumeikan Asia Pacific University, College of International Management, Japan

Business Systems Research Journal

{"article-title":"Habit Formation and Preference Change with Capital and Renewable Resources"}

Background: Although there are many formal models about interactions among habit formation, preference change and the economic growth, only a few formal models...

Habit Formation and Preference Change with Capital and Renewable Resources

Published Online: Jan 22, 2014

Page range: 108 - 125

DOI: https://doi.org/10.2478/bsrj-2013-0016

This content is open access.